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BOOK  332.42.L368H  1895  =^1  ,  ,  ,^^^ 
LAUGHLIN  #  HISTORY  OF  BIMETALLISM 
IN    UNITED    STATES 


3    T153    OOmSbll    2 


PLEASE  NOTE 

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BV    THE    SAME    AUTHOR: 

MILL'S  PRINCIPLES  OF  POLITICAL  ECONOMY, 
abridged,  with  Critical,  Bibliographical,  and  Explanatory 
Notes,  and  a  Sketch  of  the  History  of  Political  Economy. 
With  Twenty-four  Maps  and  Charts.  A  Text-book  for  Col- 
leges. (3d  edition,  1885.)  8vo,  658  pages,  cloth.  Price, 
$3.50. 


U  ( 


THE  HISTORY 

OF 


BIMETALLISM 


IN   THE 


UNITED  STATES. 


BY 
J.   LAURENCE  LAUGHLIN,  Ph.  D., 

ASSISTANT   PROFESSOR   OF   POLITICAL    ECONOMY    IN   HARVARD   UNIVERSITY, 


NEW  YORK: 
D.    APPLETON    AND    COMPANY, 

72   FIFTH   AVENUE. 
1895. 


COPTKIGHT,    1865, 

Bt  d.  appleton  and  compajsty. 


TO 

H.   M.   P, 


GRESHAM'S  LAW. 

"  Oftentimes  have  we  reflected  on  a  similar  abuse 
In  the  choice  of  men  for  office,  and  of  coins  for  common  use ; 
For  your  old  and  standard  pieces,  valued  and  approved  and  tried, 
Here  among  the  Grecian  nations,  and  in  all  the  world  beside, 
Recognized  in  every  realm  for  trusty  stamp  and  pure  assay, 
Are  rejected  and  abandoned  for  the  trash  of  yesterday  ; 
For  a  vile,  adulterate  issue,  drossy,  counterfeit  and  base, 
Which  the  traffic  of  the  city  passes  current  in  their  place  I  " 

Abistophanes,  "Fbogs,"  891-898;  Frere's  Translation. 

"  Whilst  each  of  the  two  metals  was  equally  a  legal  tender  for  debts 
of  any  amount,  we  were  subject  to  a  constant  change  in  the  principal 
standard  measure  of  value.  It  would  sometimes  be  gold,  sometimes 
silver,  depending  entirely  on  the  variations  in  the  relative  value  of  the 
two  metals;  and,  at  such  times,  the  metal  which  was  not  the  standard 
would  be  melted  and  withdrawn  from  circulation,  as  its  value  would  be 
greater  in  bullion  than  in  coin." 

KiCARDO. 


PKEFACE  TO  THE   SECOND  EDITION. 


The  various  tables  in  this  edition  have  been  continued, 
so  far  as  possible,  to  the  latest  dates.  In  Appendix  YI,  the 
exports  of  silver  from  the  United  States  to  the  East  for 
1870-1885,  and  in  Appendix  YII,  the  total  coinage  of  gold 
and  silver  by  countries  and  by  periods  since  1850,  have  been 
inserted.  Appendix  YIII  contains  Dr.  Soetbeer's  estimate 
of  the  present  consumption  of  gold  and  silver  in  the  arts. 

Of  recent  publications.  Dr.  Soetbeer's  "  Materialien  zur 
Erliiuterung  und  Beurtheilung  der  wirthschaftlichen  Edel- 
metallverhaltnisse  und  der  Wahrungsf rage "  (1885)  is  the 
most  complete  collection  of  statistics  concerning  gold  and  sil- 
ver ever  made.  The  second  edition  of  his  book  (1886), 
which  is  even  more  valuable  than  the  first,  has  been  trans- 
lated into  English  by  Professor  F.  "W.  Taussig  for  the  report 
of  Mr.  Edward  Atkinson  to  the  Department  of  State  (De- 
cember, 1887).  Additional  contributions  to  the  subject  may 
be  found  in  the  "  Third  Report  of  the  Royal  Commission  on 
the  Depression  of  Trade  and  Industry  "  (1886). 

Congress  has  passed  the  act  of  February  19,  1887,  for  the 
retirement  and  recoinage  of  the  trade-dollar,  and  also,  in  the 
sundry  civil  appropriation  bill  of  August  4, 1886,  a  provision 
for  the  issue  of  silver  certificates  in  denominations  of  one, 
two,  and  five  dollars. 


yi  PREFACE  TO   THE  SECOND  EDITION. 

The  investigation  of  tlie  relation  of  prices  to  the  sup- 
posed scarcity  of  gold  since  1873 — to  which  public  attention 
has  been  directed  under  the  name  of  "  appreciation  of  gold  " 
— has  been  carried  out  by  me  since  the  first  edition  of  this 
volume  was  issued,  and  gives  the  facts  to  substantiate  the 
views  very  briefly  expressed  on  that  subject  in  these  pages. 
This  study  was  published  in  the  "Quarterly  Journal  of 
Economics  "  (George  H.  Ellis,  141  FranUin  Street,  Boston), 
in  April,  1887. 

To  the  large  number  of  persons  who  have  kindly  sent 

me  their  studies  on  the  silver  question  I  wish  here  to  offer 

my  acknowledgments. 

J.  L.  L. 

January^  1888. 


PEEFACE  TO  THE  FIRST  EDITION. 


Although  the  plan  of  this  book  was  conceived  with  the 
view  of  presenting  simply  a  history  of  bimetallism  in  the 
United  States,  it  has  been  necessary,  in  the  nature  of  the 
subject,  to  make  it  something  more  than  that.  And  yet  it 
was  my  hope  that  the  effect  of  an  historical  inquiry  in  sup- 
pressing some  of  the  theoretical  vagaries  of  the  day  might 
be  realized  by  showing  what  our  actual  experience  with  bi- 
metallism has  been,  in  contrast  with  the  assertions  of  some 
writers  as  to  what  it  may  be.  The  practical  lessons  from 
facts  in  such  a  subject  are  more  instructive  than  the  sup- 
positions of  theory.  That  the  facts  of  our  experience  may 
be  found  in  these  pages  in  such  a  way  as  to  enable  just 
conclusions  to  be  drawn  by  any  judicially  minded  reader 
has  been  my  aim  throughout. 

But  it  has  also  been  necessary,  in  taking  up  the  history 
of  an  economic  subject  like  bimetallism,  to  deal  with  some 
matters  of  economic  principle  as  well  as  with  the  facts  to 
which  they  are  applicable.  An  economic  history  could  not 
be  otherwise  treated.  In  all  such  cases,  however,  I  have 
tried  to  treat  the  question  without  the  use  of  technical  lan- 
guage, and  in  a  manner  intelligible  to  the  ordinary  reader. 


Viii  PREFACE. 

And  yet  I  have  not  made  this  volume  a  treatise  on  the 
theory  of  bimetallism.  The  theory  has  been  discussed  only 
so  far  as  the  hard  facts  of  our  own  experience  have  directly 
borne  upon  some  part  of  the  theory. 

In  the  pursuit  of  this  object  it  will  be  found  that  there 
are  some  portions  of  the  book  which,  at  first  glance,  may 
not  seem  to  be  relevant  to  a  history  of  bimetallism  in  our 
own  country ;  but  I  trust  that,  if  they  are  taken  in  connec- 
tion with  the  thread  of  the  history,  they  will  be  found  to  be 
absolutely  essential  to  clear  conceptions  of  the  causes  affect- 
ing the  relative  values  of  gold  and  silver.  There  are  two 
illustrations  of  this  method  which  will  convey  my  meaning, 
and  which  have  been  put  forward  as  important,  even  if  they 
are  somewhat  new.  The  first  is  the  extraordinary  produc- 
tion of  silver  beginning  near  the  close  of  the  last  century, 
and  which  I  must  consider  as  momentous  as  the  well-known 
production  of  silver  soon  after  the  discovery  of  America. 
In  order  to  discuss  the  effect  of  this  surplus  silver  on  the 
values  of  the  precious  metals,  it  was  necessary  to  furnish 
the  materials  for  comparison  in  other  and  earlier  periods. 
This  is  the  occasion  for  Charts  lY,  Y,  and  YI.  In  truth, 
I  think  sufficient  attention  has  not  been  paid  to  this  part 
of  the  history  of  the  precious  metals  by  our  writers.  The 
second  illustration,  to  which  I  wish  to  call  attention,  is 
the  explanation  in  the  chapters  of  Part  II  of  the  cause 
of  the  late  fall  in  the  value  of  silver.  I  can  not  but  be- 
lieve that  the  discussion  as  to  the  cause  hitherto  has  been 
partial,  disjointed,  and  unhistorical.  I  have  made  an  at- 
tempt to  supply  what  seemed  to  me  a  more  rational  ex- 
planation ;  and,  if  this  explanation  is  accepted,  it  must 
materially  alter  the  policy  of  the  United  States  in  regard 


PREFACE.  is 

to  the  coinage  of  silver.      Our  present  attitude  is  utterly 
unjustifiable. 

The  explanation  of  the  late  fall  in  the  value  of  silver, 
however,  is  intimately  connected,  to  my  mind,  with  an  argu- 
ment commonly  heard,  and  urged  with  great  ability  and 
learning,  in  favor  of  bimetallism — the  argument  that  gold 
has  appreciated,  and  that  there  is  not  enough  to  satisfy 
the  needs  of  trade.  This  position  has  been  maintained, 
among  others,  by  Mr.  Goschen  and  Mr.  Giffen  in  Eng- 
land, and  by  several  writers  and  speakers  in  this  country. 
I  feel  that  this  argument  should  not  be  passed  by  with- 
out pointing  out  an  economic  fallacy  in  it.  The  "  apprecia- 
tion of  gold  "  is  spoken  of  as  if  a  change  in  the  purchasing 
power  of  gold  were  a  direct  proof  of  the  abundance  or  scarci- 
ty of  gold.  Nothing  is  more  common  than  the  presenta- 
tion of  tables  of  falling  prices,  and  a  conclusion  drawn  from 
the  figures  that  gold  has  "  appreciated."  It  is  perfectly  true 
that,  as  prices  fall,  a  gold  dollar  buys  more  of  commodities, 
and  in  this  sense,  that  the  gold  coin  has  appreciated  in 
value.  But  in  all  such  arguments  the  implication  is  con- 
veyed that  this  increased  purchasing  power  of  gold,  when 
prices  fall,  is  due  to  a  diminishing  supply  of  gold  (or  to  an 
increased  demand  for  it).  This,  I  contend,  is  a  complete 
non  sequitur.  "When  prices  fell  after  the  panic  of  185Y  the 
gold  dollar  bought  perhaps  seventeen  per  cent  more  than 
before  the  disturbance ;  but  every  one  knows  that  the 
gold  supply  was  increasing  in  an  untold  quantity.  And 
yet  the  gold  dollar  had  as  certainly  "  appreciated "  as  it 
has  since  1873.  This  makes  it  necessary  to  say  that  no 
direct  inference  whatever  can  be  drawn  from  tables  of 
prices  as  to  the  quantity  of  gold  in  existence  at  a  given 


X  PREFACE. 

time.  All  economists  know  that  prices  are  affected  by  pur- 
chasing power  of  any  kind ;  that  purchasing  power,  or  de- 
mand for  goods,  comes  not  merely  from  the  actual  amount 
of  money  in  the  hands  of  the  public,  but  also  from  the 
amount  of  credit  used ;  and  that  the  rapid  use  of  money, 
banking  devices,  paper  money,  credit-substitutes  for  gold 
and  silver,  checks,  drafts,  and  book-credits,  all  go  to  increase 
the  demand  for  goods,  if  offered,  and  so  act  to  increase 
prices.  So  that,  even  if  the  supply  of  metallic  money  were 
to  remain  exactly  the  same,  prices  might  vary,  owing  to 
changes  in  the  other  factor  affecting  prices,  namely,  credit. 
Since  1873  a  great  collapse  of  credit  and  confidence  has 
occurred ;  and  it  can  not  be  argued  logically  that,  therefore, 
because  prices  have  fallen,  gold  is  becoming  scarce.  It 
may,  or  may  not,  be  true  that  gold  is  scarce,  but  it  is  not 
proved  solely  because  prices  have  fallen. 

Moreover,  even  if  credit  and  the  supply  of  money  had 
remained  exactly  the  same,  the  purchasing  power  of  gold 
might  have  increased.  The  value  of  gold  increases  if  its 
power  to  purchase  other  commodities  increases ;  and  if  di- 
minishing rates  for  transportation,  new  and  improved  pro- 
cesses of  manufacture,  the  introduction  of  labor-saving  ma- 
chinery, the  opening  up  of  fertile  agricultural  lands,  take 
place,  as  they  have  taken  place  on  an  extraordinary  scale  in 
late  years,  the  prices  of  all  articles  exchanged  against  gold 
must  fall — and  fall,  too,  without  implying  any  change  what- 
ever in  the  existing  quantity  of  gold.  That  is,  the  purchas- 
ing power  of  gold  may  increase  solely  because  of  changes 
affecting  the  articles  against  which  the  gold  is  exchanged. 
In  this  way,  if  "appreciation  of  gold"  means  an  increase 
of  its  purchasing  power,  then  gold  has  "  appreciated  "  ;  but 


PREFACE.  Xi 

that  is  nothing  new.  In  fact,  changes  in  the  value  of  gold 
are  constantly  taking  place.  After  any  disturbance  of  trade, 
gold,  or  any  money  (not  merely  gold  alone),  "  appreciates." 
And  it  is  fallacious  to  connect  with  the  words  "  apprecia- 
tion" of  gold  any  inference  whatever  as  to  its  scarcity. 

In  order  to  prove  that  gold  has  increased  in  value  from 
causes  affecting  the  quantity  alone,  the  onus  prohandi  lies  on 
any  one  to  show  that  no  changes  have  taken  place  in  any  of 
the  uses  of  credit  in  any  of  its  forms,  that  no  changes  have 
taken  place  in  the  cost  of  production  of  the  commodities  in 
the  list  whose  prices  may  be  given,  and,  after  all  this  al- 
lowance has  been  made,  it  must  be  shown  that  gold  prices 
have  fallen.  I  do  not  believe  any  human  being  is  capable 
of  carrying  on  such  an  investigation.  ]^o  one,  in  the  nature 
of  things,  can  know  what  changes  are  going  on  in  all  the 
articles  exchangeable  for  gold. 

I  have  also  wondered  why  bimetallism  should  have 
drawn  so  much  attention  when  its  whole  economic  purpose 
may  be  accomplished  in  a  more  certain  and  effective  way  by 
the  multiple  standard.  Money  has  three  chief  functions  to 
perform :  as  a  medium  of  exchange  (to  transfer  value),  as  a 
common  denominator  of  value  (to  compare  values),  and  as  a 
standard  of  deferred  payments.  IS'ow,  bimetallism  is  con- 
cerned only  with  this  last  function.  Its  chief  end  is  to  se- 
cure, as  its  advocates  claim,  a  less  changeable  standard  for 
paying  long  contracts  ;  and  to  accomplish  this  an  interna- 
tional league  is  indispensable  to  even  a  shadow  of  success 
(even  if  this  could  cause  success).  But,  as  we  have  found 
out  by  the  monetary  conferences  of  1878  and  1881,  this  is 
a  very  difficult  end  to  accomplish.    Now,  the  same  object 


xii  •  PREFACE. 

can  be  attained  bj  the  separate  action  of  individual  states, 
irrespective  of  the  action  of  others,  by  creating  a  legal 
unit  of  payment  derived  from  the  prices  of  a  sufficient 
number  of  staple  articles.  By  this  means  a  long  contract 
would  be  paid  at  its  maturity  with  exactly  the  same  pur- 
chasing power  which  was  borrowed  at  the  beginning.  In 
brief,  the  multiple  standard  would  take  away  all  reason  for 
bimetallism.     The   avocation  of  the   bimetallist   would   be 

gone. 

J.  Laueence  Laughlin. 

Harvard  University,  Cambridge,  Mass.,  October,  1885. 


COI^TE^TS. 


PART  I. 

The  United  States,  1V92-1873. 
Chapter  I. — Arguments  of  the  Bimetallists  arid  Monometallists. 


§  I.  The  inductive  process  applicable  in  this  investigation  . 

§  2.  The  main  arguments  of  the  bimetallists 

§  3.  The  main  arguments  of  the  monometallists 

§  4.  The  United  States  experiment  a  favorable  one  for  study 

§  5.  Subdivisions  of  our  subject 


PAGE 

3 
3 
6 
8 


Chapter  II.— The  Silver  Period,  179S-1834. 

1.  Situation  before  the  adoption  of  the  Constitution 

2.  Why  Hamilton  recommended  bimetallism   . 

3.  Choice  of  a  ratio  between  gold  and  silver    . 

4.  The  system  as  adopted  in  1792  .... 

5.  Grcsham's  law  and  the  disappearance  of  gold 


10 

13  V 
15 
20  V 
24 


/ 


Chapter  III. —  Cause  of  the  Change  in  the  Relative  Values  of  Gold  and 
Silver,  1780-1820. 

§  1.  The  theory  that  the  English  demand  for  gold  caused  not  a  fall  in  sil- 
ver, but  a  rise  in  the  value  of  gold S2 

§  2.  The  value  of  money  a  ratio 37 

§  3.  Did  prices  show  a  rise  in  the  value  of  gold  ?        .        .        .         .        .38 
§  4.  A  disproportionate  increase  in  the  supply  of  silver  as  compared  with 

that  of  gold  the  true  cause  of  a  fall  in  its  value       .         .         .         .41 
§  5.  Paradoxically,  when  the  annual  supply  was  declining,  the  value  of  sil- 
ver was  also  falling 50 

Chapter  IV. —  Change  of  the  Legal  Ratio  ly  the  Act  of  1834. 

§1.  Condition  of  the  circulation  before  1834 52 

§  2.  Various  proposals  to  amend  the  coinage     ......    67 


Xiv  CONTENTS. 

PAGB 

§  3.  Choice  of  the  ratio  of  1  :  16 60 

§  4.  Tendency  to  the  disappearance  of  silver 64 

§  5.  Debasement  of  the  gold  standard  by  the  act  of  1834  .        .        .        .69 
§  6,  Act  of  1837,  changing  the  alloy  to  one  tenth ^S 

Chapter  V. —  The  Gold  Discoveries  and  the  Act  of  1853. 

§  1.  A  serious  fall  in  the  value  of  gold '75 

§  2.  The  disappearance  of  silver  coins 76 

§  3,  The  single  gold  standard  accepted 19 

§  4.  Principles  governing  a  subsidiary  coinage  as  contained  in  the  act  of 

1853 82 

Chapter  Y1.— The  Gold  Standard,  1853-1873. 

§  1.  The  single  gold  standard  to  1862 86 

§  2.  The  displacement  of  gold  and  subsidiary  coins  in  1862  by  depreciated 

paper ^       .        .     87 

§  3.  The  resumption  of  specie  payment  in  silver  small  coins       .        .        .89 

Chapter  VII. — The  Demonetization  of  Silver. 

%  1.  Influence  of  the  act  of  1873 92 

§  2.  Silver  dollar  demonetized  by  act  of  1874 93 

§  3.  The  charge  that  silver  was  demonetized  surreptitiously        .         .         .95 
S4.  The  trade  dollar .        ......  ....  101 


PART  11. 

The  Late  Fall  in  the  Value  of  Silver. 

Chapter  VIII. — The  Production  of  Gold  since  1850. 

§  1.  The  reason  for  the  digression  of  Part  II 109 

§  2.  The  effects  of  the  new  gold  to  be  discussed  only  as  they  influence  the 

values  of  the  precious  metals  ........  110 

§  3.  Statement  of  the  facts  of  the  gold  production Ill 

§  4.  The  preference  for  gold  to  silver  in  commercial  nations       .        .        .113 
§  5.  Production  of  gold  and  silver  in  1493-1850  compared  with  the  yield 

in  1850-1875 115 

§6.  Effect  on  the  value  of  silver 116 

§  7.  France  receives  gold  and  gives  up  silver 118 

Chapter  IX. — India  and  the  East. 

§  1.  The  passion  of  Eastern  nations  for  ornaments 122 

S  2.  Their  demand  for  silver  as  a  medium  of  exchange       ....  124 


CONTENTS.  XV 

PAOB 

§  3.  Amount  of  silver  sent  to  the  East 125 

§  4.  Considerations  affecting  the  future  demand  for  silver  in  India    .        .128 
§  5.  The  effect  of  the  Indian  demand  on  the  relative  values  of  gold  and 

silver 130 

Chapter  X. — Germany  Displaces  Silver  with  Oold. 

§  1.  The  opportunity  presented  to  Germany  for  changing  a  silver  to  a  gold 

currency 135 

§  2.  The  measures  adopted  for  this  purpose 137 

§  3.  Amount  of  silver  thrown  on  the  market 140 

§  4.  German  demand  for  gold 144 

Chaptee  XI. — France  and  the  Latin  Union. 

§  1.  Origin  of  the  Latin  Union,  1865 146 

§  2.  Monetary  experience  of  France 150 

§  3.  Suspension  of  silver  coinage,  1874 153 

§  4.  Subsequent  attitude  of  the  Latin  Union 156 

Chapter  XII. —  Cause  of  the  Late  Fall  in  the  Value  of  Silver. 

§  1.  The  extent  of  the  fall 161 

g  2.  Causes  of  the  fall  assigned  by  the  Committee  of  the  House  of  Com- 
mons        164 

§  3.  The  increased  gold  production  since  1850  the  cause  of  the  fall  in 

silver 16Y 

§  4.  This  cause  traced  m  the  monetary  events  since  1850  .        .        ,        .170 


PART  m. 

The  United  States,  1873-1885. 
Chapter  XIII. — Silver  Legislation  in  1878. 
§  1.  Acceptance  of  the  act  of  1873 


§  2.  Disregard  of  the  European  situation   .... 
§  3.  The  provisions  and  legislative  history  of  the  Bland  bill 
§  4.  Conditions  in  the  United  States  preceding  the  act  of  1878 
§  5.  Reasons  for  the  passage  of  the  measure 
§  6.  The  Matthews  resolution  and  the  Silver  Commission   . 

Chapter  XIV. — The  Present  Situation. 


179 

180 
181 
186 
188 
201 


§  1.  Forces  which  keep  the  silver  dollar  at  par 205 

§  2.  The  trade  dollar  discontinued 208 

§  3.  The  Treasury  and  the  banks 210 

§4.  Attempts  to  preserve  the  gold  basis    .        .        .        .        .        .        .214 


Xvi  CONTENTS. 

APPENDICES. 

Appendix  I. — Production  of  Gold  and  Silver  in  the  World. 

PAGE 

A.  1493-1850 217 

B.  \%m-\Sn^ 218 

C.  1876-1883 219 

Appendix  II. — Relative  Values  of  Gold  and  Silver. 

A.  Ratios  of  gold  to  silver,  by  periods,  1501-1875     .        .  *     .        .        .220 

B.  Ratios  of  gold  to  silver,  by  years,  1687-1832 221 

C.  Ratios  of  gold  to  silver,  by  years,  1833-1884.     Pixley  and  Abeli   .         .  223 

D.  Average  yearly  price  of  standard  silver  per  ounce  in  London,  1833-1884  224 

E.  Monthly  London  prices  of  silver  in  pence,  1871-1884    ....  224 

F.  Ratios  of  gold  to  silver,  by  months,  1845-1880 225 

G.  Method  of  computing  ratios  from  London  prices  of  silver      .         .         .  225 
Method  of  computing  the  value  of  a  dollar  of  412|  grains  from  New 

York  prices  of  silver 226 

Appendix  III. — Coinage  Laws. 

A.  Laws  of  the  United  States  relating  to  coinage 227 

B.  The  French  monetary  law  of  1803 .236 

C.  German  monetary  laws  of  1871  and  1873 237 

D.  Treaty  of  1865  forming  the  Latin  Union 245 

Appendix  IV. 
Coinage  of  Gold  and  Silver  at  the  United  States  Mint,  1793-1884      •        .  249 

Appendix  V. 
Equivalent  inGold  of  the  Silver  Dollar  of  ^12^  Grains,  1834-1884    .        .251 

Appendix  VI. 
Floio  of  Silver  to  the  East,  1835-1880 252 

Appendix  VII. 
Coinage  of  Gold  and  Silver  at  the  French  Mint,  1850-1875       .        .        .254 

Appendix  VIII. 
Consumption  of  Gold  and  Silver  in  the  Arts 255 

Index 257 


II^DEX  OF  OHAETS. 


PAGB 

I.  Eatio  of  Gold  to  Silver,  1780-1833    .  .  .  .19 

II.  Coinage  of  Gold  and  Silver  at  the  IJnited  States  Mint, 

1793-1838 31 

III.  Movement  of  Prices  of  Forty  Articles,  1782-1865,  with 

additional  line  from  1857  to  1885  .  .  .       38 

IV.  Eelative  Production  of  Gold  and  Silver,  1493-1880  .       42 
V.  Relative  Quantities  of  Gold  and  Silver  produced,  1560- 

1660 47 

VI.  Relative  Quantities  of  Gold  and  Silver  produced,  1761- 

1820 .47 

VII.  Ratio  of  Gold  to  Silver,  1820-1860    .  .  .  .61 

VIII.  Coinage  of  Gold  and  Silver  at  the  United  States  Mint, 

1834-1860  ......       69 

IX.  Production  of  Gold  and  Silver  since  1493     .  .  .76 

X.  Relative  Production  of  Gold  and  Silver,  1493-1850,  and 

1851-1875 116 

XI.  Excess  of  Exports  and  Imports  of  Gold  and  Silver  from 

and  into  France,  1849-1882        .  .  .  .119 

XII.  Net  Imports  of  Gold  and  Silver  into  British  India,  1855- 

1882         .  .  .  .  .  .  .126 

XIII.  Ratio  of  Gold  to  Silver,  by  years,  1687-1884  .  .     161 

XIV.  Monthly  Fluctuations  in  the  Price  of  Silver,  1876-1879      .     173 
XV.  Fall  in  the  Value  of  Silver,  1870-1884  .  .  .180 

XVI.  Coinage,   and  Distribution  of  Silver  Dollars  within  and 

without  the  United  States  Treasury,  1878-1885  .    210 


PAET    I. 


THE  UNITED   STATES,   1792-1873. 


PART    I. 

THE  UI^ITED  STATES,  1792-1873. 


CHAPTER  I. 

THE   ARGUMENTS    OF    BEMETALLISTS    AJSTD   M0N0METALLIST8. 

§  1.  The  conflicting  opinions  of  the  day  in  regard  to  the 
adoption  of  bimetallism  by  the  United  States,  and  the  dis- 
regard of  the  facts  within  our  own  experience,  make  it  desira- 
ble that  these  facts  should  be  investigated  historically,  and 
the  results  presented  in  a  simple  form  for  general  use. 
Monetary  science,  moreover,  will  gain  by  any  honest  at- 
tempt to  collect  accurate  data  which  may  serve  in  the  pro- 
cess of  verification  of  economic  principles,  enabling  us  either 
to  confirm  the  truth  of  previous  conclusions,  or  to  demon- 
strate their  divergence  from  actual  facts.  In  a  monetary  in- 
vestigation of  this  kind  induction  is  our  main  dependence ; 
here,  in  truth,  as  we  seek  the  means  for  verification,  is  the 
proper  field  for  the  historical  method. 

In  order,  however,  to  place  the  present  history  in  its 
proper  Hght — in  order  that  it  may  bear  to  some  purpose  on 
the  bimetallic  discussion — it  has  seemed  fit  to  give  a  very 
brief  resume  of  the  main  arguments  ^  of  both  parties  to  the 
controversy. 

§  2.  I.  Bevietallism  has  been  proposed  under  two  such 
widely  differing  conditions  that  the  following  general  divi- 
sion of  arguments  may  properly  be  adopted : 

*  See  also  S.  Dana  Horton's  "  Gold  and  Silver,"  chap.  iii. 


4  THE   UNITED  STATES,    1792-1873. 

A.  iN'ational  Bimetallism. 

B.  International  Bimetallism. 

(A.)  (1)  The  selection  of  both  gold  and  silver  bj  an  indi- 
vidual state  as  legal  payment  of  debts  to  any  amount  at  a  ratio 
fixed  without  regard  to  the  legal  ratios  of  other  states  may 
be  defined  as  national  bimetallism.  An  example  of  this  sys- 
tem is  to  be  found  at  present  in  the  United  States,  where, 
although  no  other  country  of  importance  has  the  same  ratio 
(and  although  the  legal  ratio  does  not  correspond  with  the 
market  value  of  the  two  metals),  we  have  a  proportion  of  1 :  16. 
Such  a  system  is  not  upheld  by  any  economic  writer  of  re- 
pute. Whenever  it  is  advocated  in  the  United  States  (2)  it 
has  been  urged  from  a  strong  belief  that,  if  we  do  not  use 
silver,  there  will  not  be  enough  of  the  precious  metals  in 
existence  to  perform  the  exchanges ;  or  (3)  with  the  expecta- 
tion of  inducing  other  countries  to  adopt  bimetallism  ;  (4)  or 
to  sustain  the  price  of  silver;  (5)  or  to  force  the  cheaper 
metal  into  use  as  an  easy  means  of  scaling  debts  and  of  re- 
lieving debtors  of  a  part  of  their  burdens.  The  theories  of 
national  bimetallism,  as  thus  advocated,  are  widely  different 
from  the  tenets  of  another  school  of  writers,  who  are  also 
known  as  bimetallists. 

(B.)  An  agreement  between  the  chief  commercial  nations 
of  the  world  on  one  given  ratio  (e.  g.,  15^  :  1)  would,  in  the 
opinion  of  this  other  school,  keep  the  value  of  silver  rela- 
tively to  gold  invariable,  and  so  cause  the  concurrent  use  of 
both  metals  in  all  the  countries  of  such  a  league.  This  may 
be  termed  international  bimetallism,  to  distinguish  it  from 
the  other  body  of  theories.  (6)  The  essential  part  of  this 
theory  is  that  the  legal  provision  for  the  use  of  silver  in  the 
coinage  of  each  state  creates  a  demand  for  silver ;  and  that, 
inasmuch  as  other  states  of  the  league  have  the  same  ratio, 
no  reason  could  exist  why  either  silver  or  gold  should  leave 
one  country  for  another.  (7)  In  close  connection  with  this 
argument  it  is  urged  that  the  "  compensatory  action  "  of  a 
double  standard  will  prevent  that  extreme  fluctuation  of  the 
standard  of  prices  which  is  made  possible  by  a  single  stand- 


ARGUMENTS  OF  BIMETALLISTS  AND   MONOMETALLISTS.        5 

ard ;  since,  as  prices  follow  the  metal  whicli  is  for  the  time 
the  cheaper,  the  latter  will  feel  a  demand  just  in  proportion 
as  the  other  metal  loses  it.  (8)  The  desire  to  use  gold,  it  is 
held,  should  be  discountenanced,  as  tending  not  only  to 
lower  the  value  of  silver,  but  to  concentrate  the  monetary  de- 
mand of  the  whole  civilized  world  upon  gold  ;  and  that,  as  its 
quantity  would  be  alone  insufficient  for  the  needs  of  commerce, 
the  value  of  gold  must  increase,  and  the  prices  of  all  things 
diminish,  to  the  great  discouragement  of  business  enterprise. 
There  would  be  a  "gold  famine  "  the  effects  of  which  would 
be  intolerable.^  (9)  This  same  school  also  present  very 
strongly  the  opinion  that  the  general  demonetization  of  sil- 
ver would  so  increase  the  value  of  gold,  and  the  value  of  the 
unit  in  which  the  enormous  public  debts  of  the  world  must 
be  paid,  that  it  would  entail  a  heavy  loss  to  the  taxpayers. 

(10)  Other  writers,  still,  urge  that  the  two  precious  met- 
als were  designed  by  a  Higher  Power  as  media  of  exchange, 
and  that  it  is  a  mistake  arbitrarily  to  set  up  one  of  them  as  a 
standard  by  which  other  commodities  are  to  be  measured, 
and  to  discard  the  other.^ 

§  3.  II.  Monometallism  is  not  a  belief  in  the  sole  use  of 
gold.  Its  advocates  regard  gold  as  the  least  variable  of  the 
two  metals,  as  best  suited  for  large  payments ;  and  believe 
that  silver,  as  a  heavier  and  cheaper  metal,  should  also  be  used 
for  smaller  payments,  but  not  as  an  unlimited  legal  tender. 
(1)  Monometallists  hold  that  "  national  bimetallism  "  is  an  im- 
possibility for  any  length  of  time,  since,  as  soon  as  one  metal 
in  the  market  falls  slightly  below  the  legal  ratio,  the  other 

'  These  arguments  may  be  most  conveniently  found  in  F.  A.  Walker's 
"  Political  Economy,"  and  "  Money,  Trade,  and  Industry " ;  and  in  S.  Dana 
Horton's  "  Silver  and  Gold,"  and  the  "  Report  of  the  International  Monetary 
Conference  of  1878."  See  also  the  French  Report  of  the  Mon.  Confer,  of  1881, 
in  index  "  Bimetallisme." 

2  "  Providence  seems  to  have  originally  adjusted  the  relative  values  of  the 
precious  metals." — Sir  Roderick  Murchison,  quoted  by  Ernest  Seyd  in  "  Decline 
of  Prosperity,"  title-page.  The  following  words  of  Turgot  are  often  quoted : 
"  Gold  and  silver  were  constituted,  by  the  nature  of  things,  money  and  universal 
money,  independently  of  all  convention  and  all  law." 


6  THE  UNITED   STATES,   1792-1873. 

metal  will  be  driven  out  of  circulation,  and  the  country  will 
really  have  only  a  succession  of  single  standards,  alternating 
between  gold  and  silver.  (2)  They  believe  that  one  country 
alone  can  not  hold  up  the  value  of  silver  against  the  tenden- 
cies of  many  counti-ies  to  disuse  it ;  and  if  it  should  try,  the 
holders  of  silver  bullion  would  gain  at  the  expense  of  the 
single  country,  which  is  sacrificing  itself  by  buying  silver 
which  will  depreciate  on  its  hands  ;  (3)  that,  if  it  is  an  object 
of  the  United  States  to  induce  other  countries  to  join  us  in  a 
league,  we  can  best  force  that  policy  on  them  by  withdrawing 
from  our  isolated  and  unsupported  position  until  the  others 
manifest  a  disposition  to  join  us ;  (4)  and  that  the  movement 
to  force  silver  upon  the  United  States  at  the  present  ratio  of 
1 :  16  is  a  disguised  form  of  the  policy  which  a  few  years  ago 
led  to  the  "greenback"  heresy,  and  is  intended  to  favor 
owners  of  silver  mines,  and  dishonest  debtors  who  wish  a 
cheaper  unit  of  payment,  at  the  expense  of  national  honor 
and  credit. 

It  would  be  hard  to  say  what  the  monometallists  hold  in 
regard  to  international  bimetallism,  since  it  is  largely  a  mat- 
ter of  theory  and  of  future  potentiality.  Monometallists  do 
not — as  is  so  often  said — believe  that  gold  remains  absolutely 
stable  in  value.  They  hold  that  there  is  no  such  thing  as  "  a 
standard  of  value  "  for  future  payments  in  either  gold  or  sil- 
ver, which  remains  absolutely  invariable ;  but  that,  so  long  as 
we  must  use  one  of  the  two,  gold  is  preferable,  inasmuch  as 
it  has  proved  in  the  past  more  steady  in  value  than  silver. 
(5)  They  admit  that  a  general  agreement  of  states  to  coin 
silver  at  a  ratio  higher  than  the  present  market  value  would 
have  an  effect  to  raise  its  value ;  but,  while  it  is  extremely 
doubtful  whether  this  league  could  overcome  natural  forces, 
it  is  denied  that  such  a  league  is  politically  possible,  and  the 
experience  of  the  conferences  of  1878  and  1881  is  cited  to 
show  it.  (6)  As  regards  the  "compensatory  action"  of  a 
double  standard,  it  is  denied  that  this  can  act  without  alter- 
nately changing  the  standard  from  a  single  standard  of  gold 
to  a  single  standard  of  silver — and  this  is  not  regarded  as  a 


ARGUMENTS  OF  BIMETALLISTS  AND  MONOMETALLISTS.        7 

"double  standard."  There  can  be  no  "compensation"  ex- 
cept as  one  metal  drives  out  the  other.  "While  it  may  pre- 
vent extreme  fluctuations  of  the  standard  of  prices,  it  brings 
more  frequent  fluctuations,  each  of  which  is  sufiicient  to 
drive  one  metal  out  of  circulation.  (7)  The  tendency  to  dis- 
use silver  is,  they  claim,  due  to  natural  causes  affecting  the 
demand,  and  the  legislation  hostile  to  silver  but  registers  the 
wishes  of  commerce.  (8)  Tlie  fall  of  prices  since  1873  is  used 
to  prove  an  appreciation  of  gold ;  but  it  is  denied  that  prices 
depend  directly  on  the  quantity  of  money,  and  that  it  can  not 
be  said  that  because  prices  fall  money  has  appreciated.  The 
fall  of  prices,  used  to  indicate  an  increase  in  the  value  of  gold, 
is  found  to  depend  quite  as  much  on  a  collapse  of  credit,  and 
lessened  cost  of  production  of  the  commodities  against  which 
gold  is  exchanged,  as  on  any  relative  scarcity  of  gold.  (9) 
As  regards  national  debts,  it  is  distinctly  averred  that  neither 
gold  nor  silver  forms  a  just  measure  of  deferred  payments,  and 
that  if  justice  in  long  contracts  is  sought  for,  we  should  not 
seek  it  by  the  doubtful  and  untried  expedient  of  interna- 
tional bimetallism,  but  by  the  clear  and  certain  method  of  a 
multiple  standard,  a  unit  based  upon  the  selling  prices  of  a 
number  of  articles  of  general  consumption.  A  long  contract 
would  thereby  be  paid  at  its  maturity  by  the  same  purchas- 
ing power  as  was  given  in  the  beginning. 

(10)  Far  from  being  true  that  the  value  ^  of  any  metal  is 
providentially  fixed,  it  depends,  on  the  contrary,  on  the 
power  of  that  metal  to  satisfy  the  demands  of  commerce  as 
an  artificial  medium  of  exchange  to  save  us  from  barter ;  as 
countries  grow  in  wealth,  it  is  found  that,  as  an  historical 
fact,  commercial  centers,  where  transactions  are  large,  prefer 

>  "  Between  gold  and  silver,  therefore,  there  is  not  any  fixed  proportion  as 
to  value,  established  by  Nature,  any  more  than  there  is  a  fixed  proportion 
established  by  Nature  between  lead  and  iron,  or  between  wheat  and  tobacco. 
Nature  does  not  say  that  one  ounce  of  gold  shall  always  be  worth  so  many 
ounces  of  silver  any  more  than  she  says  that  a  certain  number  of  pounds  of 
iron  shall  always  be  worth  so  many  pounds  of  lead,  or  that  a  bushel  of  wheat 
shall  always  be  worth  a  fixed  quantity  of  tobacco." — Raguet,  "  Currency  and 
Banking,"  p.  219. 


8  THE  UNITED  STATES,  1^92-1873. 

gold  to  silver  ;  consequently,  the  value  of  a  metal,  merely  as 
affected  by  its  demand,  can  not  remain  the  same.  Moreover, 
the  supply  of  a  metal  can  very  seriously  disturb  its  perma- 
nent value.  No  commodity,  not  even  gold,  has  any  sacer- 
dotal qualities  vs^hich  keep  its  value  invariable. 

§  4.  In  regard  to  some  of  the  above  differences  of  opinion, 
the  history  of  bimetallism  in  the  United  States  will,  in  my 
opinion,  give  such  teaching  as  ought  to  settle  all  cavil  or  dis- 
pute. The  experience  of  this  country  has  been  unique.  !No 
experiment  of  bimetallism  has  ever  been  inaugurated  under 
circumstances  more  favorable  for  its  success ;  and  no  hos- 
tility or  suspicion  attended  its  progress.  'No  fairer  field  for 
its  trial  could  have  been  found;  and  its  progress  under 
such  conditions  makes  its  history  peculiarly  instructive.  We 
have  had  in  this  country  a  legal  and  nominal  double  standard 
from  the  establishment  of  the  Mint  in  1792  to  the  present 
day,  with  the  exception  of  the  years  between  1873  and 
1878  ;  and  in  this  period  of  about  ninety  years  we  have  had 
almost  every  possible  experience  with  our  system.  Has  it 
proved  a  success  in  the  past  ?  "What  lessons  does  it  offer 
for  the  future  ? 

It  will  be  remembered  that  the  question  of  bimetallism 
has  been  actively  discussed  only  since  the  great  fall  of  silver 
in  1876,  and  that  great  animation  and  warmth  have  been 
shown  both  by  its  friends  and  foes.  An  experience  of  bimet- 
allism, therefore,  under  no  attacks  and  under  friendly  au- 
spices, during  the  years  preceding  1876,  for  more  than  three 
quarters  of  a  century,  ought  to  furnish  us  lessons  which  we 
can  readily  accept,  because  they  are  drawn  from  results 
caused  by  normal  conditions,  and  not  vitiated  by  any  suspicion 
of  prejudice  against  silver.  A  ship  which  had  proved  unsea- 
worthy  in  fair  weather  would  not  be  a  secure  refuge  in 
stormy  seasons.  Has  our  system  proved  successful  under 
these  fair  and  normal  conditions  ? 

§  5.  In  detailing  the  events  of  our  history  in  the  follow- 
ing pages  it  will  be  found  convenient  to  divide  the  time  into 


ARGUMENTS  OF  BIMETALLISTS  AND   MONOMETALLISTS.        9 

certain  periods,  distinguished  by  important  legislation  and 
by  the  consequent  effects  : 

I.  Silver  period,  1792-1834. 
11.  Gold  period,  1834-1853. 

III.  Gold  period,  1853-1873. 

IV.  Single  gold  standard,  1873-1878. 
Y.  Transition  period,  1878-1885. 

Part  I  will  include  the  first  three  periods,  from  1792  to 
1873  ;  Part  II  will  offer  a  statement  of  the  antecedent  facts, 
and  an  explanation,  of  the  late  extraordinary  fall  in  the  value 
of  silver,  which  was  most  marked  in  1876  ;  and  Part  III  will 
include  the  history  of  the  periods  in  the  United  States  from 
1873  to  the  present  day,  with  a  statement  of  the  present 
situation. 


CHAPTEE  U. 

THE    SILVER   PEEIOD. 

§  1.  In  the  time  before  the  adoption  of  the  Constitution 
the  circulating  medium  of  the  colonies  was  made  up  vir- 
tually of  foreign  coins.  During  the  war  of  the  Revolution 
the  "  Spanish  milled  dollar "  was  the  unit  of  common  ac- 
count.^ The  paper  money,  it  was  at  lirst  expected,  was  to  be 
redeemed  in  this  medium.  But  as  regards  coins  of  a  de- 
nomination other  than  the  Spanish  dollar,  there  were  a  vari- 
ety of  them  in  circulation.  In  keeping  accounts,  next  in  order 
of  common  usage  to  the  dollar  came  the  pound  and  shilling, 
which  was  the  natural  consequence  of  our  English  origin ; 
but  the  shilling  stamped  by  some  of  the  colonies,  although 
forming  a  considerable  part  of  the  money  in  circulation, 
varied  widely  in  value.^  Besides  these  kinds  of  money  there 
were  also  English,  French,  Spanish,  and  Portuguese  coins, 
which  in  1776  were  assigned  ^  the  following  relative  values  : 

'  Cf.  J.  K.  Upton's  "  Money  in  Politics,"  chap.  iii. 

5  The  Spanish  dollar  equaled  5  shillings  in  Georgia ;  8  shillings  in  North  Caro- 
lina and  New  York  (12^  cents);  6  shillings  in  Virginia,  Connecticut,  New 
Hampshire,  Massachusetts,  and  Rhode  Island  (16f  cents) ;  7  shillings  6  pence 
in  Maryland,  Delaware,  Pennsylvania,  and  New  Jersey ;  32  shillings  6  pence  in 
South  Carolina.  This  accounts  for  the  present  reckoning  of  12i  cents  to  a 
"shilling"  in  New  York,  Ohio,  etc.,  and  of  16§  cents  in  New  England  and  Vir- 
ginia ("nine  pence"  still  being  used  as  the  equivalent  of  12J  cents).  The  per- 
sistence, to  the  present  day,  of  the  units  of  account  of  a  century  ago,  although 
the  coins  representing  them  have  long  passed  out  of  existence,  is  one  of  the 
striking  facts  in  monetary  history. 

3  "Report  of  1878,"  p.  422.  It  is  to  be  kept  in  mind,  however,  that  the 
Spanish  dollar  with  which  this  comparison  was  made  varied  in  weight. 


THE  SILVER  PERIOD. 


11 


Weight. 

Value. 

English  guinea 

Dwt. 

5 

5 
18 

9 

4 

4 

6 

grains. 
6 
5 
0 
0 
8 
4 
18 

Dollars. 
4| 

French        "       

4f 

Johannes 

16 

Half  Johannes 

8 

Spanish  pistole   

3| 

H 

6 

French         "     

Moidore 

English  crown 

u 

French        "     

4 

English  shilling 

^ 

From  1782  to  1786  the  colonies  began  seriously  to  con- 
sider the  difficulties  arising  from  the  variety  of  different 
coins  in  circulation,  and  their  deleterious  effects  on  business 
and  methods  of  accounts,  to  the  extent  that  they  proposed  a 
special  American  coinage  with  the  dollar  as  the  basis.  In 
1782  Robert  Morris,  Superintendent  of  Finance,  made  pro- 
posals ^  for  the  establishment  of  an  American  Mint,  which 
were  approved  by  the  Congress  of  the  Confederation.  He 
faced  the  question  at  once.  Of  what  metal  should  the  dollar 
be  made  ?  He  urged  the  use  of  silver  alone,^  for,  he  said, 
both  gold  and  silver  could  not  be  used,  because  the  ratio 
between  the  two  metals  w^as  not  constant. 

Jefferson  advocated  the  decimal  denominations  in  the 
system  of  coins,  and  urged  the  dollar^  as  a  unit.  He  adds 
in  regard  to  the  ratio  : 

"  The  proportion  between  the  values  of  gold  and  silver  is  a 
mercantile  problem  altogether"  ;  and  further  remarks  :  "Just 
principles  will  lead  us  to  disregard  legal  proportions  altogether, 
to  inquire  into  the  market  price  of  gold  in  the  several  countries 
with  which  we  shall  principally  be  connected  in  commerce, 
and  to  take  an  average  from  them.  Perhaps  we  might  with 
safety  lean  to  a  proportion  somewhat  above  par  for  gold,  con- 


*  "  Report  of  the  International  Monetary  Conference  of  1878,"  pp.  425-435. 
In  referring  to  this  authority  I  shall  hereafter  call  it  the  "Report  of  1878." 

»  "Report  of  1878,"  pp.  430,  431. 

^  Ibid.,  pp.  437-443.  "  The  unit  or  dollar  is  a  known  coin,  and  the  most 
familiar  of  all  to  the  mind  of  the  people.  It  is  already  adopted  from  South  to 
North,  has  identified  our  currency,  and  therefore  happily  offers  itself  as  a  unit 
already  introduced." 


12 


THE  UNITED   STATES,    1792-1873. 


sidering  our  neighborhood  and  commerce  with  the  sources  of 
the  coins  and  the  tendency  which  the  high  price  of  gold  in 
Spain  [16:1]  has  to  draw  thither  all  that  of  their  mines,  leav- 
ing silver  principally  for  our  and  other  markets.  It  is  not  im- 
possible that  15  for  1  may  be  found  an  eligible  proportion." 

Morris  had  stated  the  ratio  in  America  to  be  about  1 :  14r| 
at  this  time.  The  proposals  of  Moms  and  Jefferson  were, 
however,  not  carried  into  effect. 

In  1785  the  strong  desire  for  a  metallic  currency,  coupled 
witii  the  belief  that  silver  could  be  most  easily  obtained,  was 
evident  in  a  "  Report  ^  of  a  Grand  Committee  of  the  Conti- 
nental Congress  " : 

"  In  France,  1  grain  of  pure  gold  is  counted  worth  15  grains 
of  silver.  In  Spain,  16  grains  of  silver  are  exchanged  for  1  of 
gold,  and  in  England  15^.  In  both  of  the  kingdoms  last 
mentioned  gold  is  the  prevailing  money,  because  silver  is  un- 
dervalued. In  France,  silver  prevails.  Sundry  advantages 
would  arise  to  us  from  a  system  by  which  silver  might  become 
the  prevailing  money.  This  would  operate  as  a  bounty  to  draw 
it  from  our  neighbors,  by  whom  it  is  not  sufficiently  esteemed. 
Silver  is  not  exported  so  easily  as  gold,  and  it  is  a  more  useful 
metal." 

Congress  again  accepted  the  dollar  as  a  unit,  and  other 
coins  of  decimal  proportions  to  the  dollar,  but  nothing  was 
done. 

April  8, 1786,  the  Board  of  Treasury,^  although  they  men- 
tion that  the  ratio  then  prevailing  in  America  was  1 :  15*60, 
made  three  reports,  showing  the  following  adjustment  of  the 
coins : 


Weight  of 
silver  dollar. 

Weight  of 
gold  dollar. 

Ratio  between 
silver  and  gold  coins. 

Report  No.  1 

Grains  fine. 
376-64 
35009 
521-73 

Grains  fine. 
24-6268 
23-79 
34-782 

1  :  15-253 

Report  No.  2 

Report  No.  3 

1  :  14-749 
1  :  15 

The  first  report  was  followed,  and  the  board  ordered  to  draft 
an  ordinance  for  the  establishment  of  a  Mint,  which  was  ac- 

'  "  Report  of  1878,"  pp.  445-449. 

2  Samuel  O.sgood  and  Walter  Livingston.   See  "  Report  of  1878,"  pp.  449-453. 


THE   SILVER  PERIOD.  13 

cepted  October  16,  17S6.  ITotliing,  however,  was  carried 
into  effect  before  the  adoption  of  the  Constitution.  The 
colonies  remained,  consequently,  until  1792,  with  a  circulating 
medium  of  foreign  coins,  composed  almost  entirely  of  silver, 
and  subject  to  the  regulations  of  the  foreign  governments 
which  issued  them. 

§  2.  The  establishment  of  a  double  standard  ^  in  the 
United  States  is  due  to  Alexander  Hamilton.  His  "  Report  ^ 
on  the  Establishment  of  a  Mint "  remains  the  best  source  of 
information  as  to  the  reasons  for  adopting  the  system  which 
has  continued,  with  a  slight  break,  from  that  day  to  this.  As 
was  to  be  expected,  the  arguments  urged  at  the  present  time 
in  favor  of  bimetallism  had  not  occurred  to  Hamilton.  He 
did  not  enter  into  a  general  discussion  of  the  effects  of  a 
double  standard,  such  as  we  might  expect  from  a  modem 
bimetal] ist.  In  speaking  of  gold  and  silver,  he  was  em- 
phatic in  stating  his  belief  that  if  we  must  adopt  one  metal 
alone,  that  metal  should  be  gold,  and  not  silver  (at  variance, 
as  we  have  seen,  with  the  views  of  Robert  Morris  in  17S2) ; 
because,  said  Hamilton,^  gold  was  the  metal  least  liable  to 
variation.  In  fact,  we  find  in  his  report  thus  early  in  our 
history  an  expression  of  that  preference  for  gold  over  silver, 
whenever  the  former  can  be  had,  which  has  since  then  played 
no  little  part  among  the  influences  acting  on  the  relative 
values  of  the  two  metals. 

'  For  the  first  instance  of  a  double  standard  in  this  country  see'the  experiment 
of  the  colony  of  Massachusetts  in  1762.    Cf.  Upton,  "  Money  in  Politics,"  p.  21. 

»  Dated  May  5,  1791.     It  is  given  in  full  in  "  Report  of  1878,"  pp.  454-484. 

*  "  Gold  may,  perhaps,  in  certain  senses,  be  said  to  have  a  greater  stability 
than  silver ;  as,  being  of  superior  value,  less  liberties  have  been  taken  with  it 
in  the  regulations  of  different  countries.  Its  standard  has  remained  more  uni- 
form, and  it  has,  in  other  respects,  undergone  fewer  changes  ;  as,  being  not  so 
much  an  article  of  merchandise,  owing  to  the  use  made  of  silver  in  the  trade 
with  the  East  Indies  and  China,  it  is  less  liable  to  be  influenced  by  circum- 
stances of  commercial  demand.  And  if,  reasoning  by  analogy,  it  could  be  af- 
firmed that  there  is  a  physical  probability  of  greater  proportional  increase  in 
the  quantity  of  silver  than  in  that  of  gold,  it  would  afford  an  additional  reason 
for  calculating  on  greater  steadiness  in  the  value  of.  the  latter." 
3 


14  THE   UNITED  STATES,    1792-1873. 

"  As  long  as  gold,  either  from  its  intrinsic  superiority  as  a 
metal,  from  its  rarity,  or  from  the  prejudices  of  vnanJcind,  re- 
tains so  considerable  a  pre-eminence  in  value  over  silver  as  it 
has  hitherto  had,  a  natural  consequence  of  this  seems  to  be 
that  its  condition  will  be  more  stationary.  The  revolutions, 
therefore,  which  may  take  place  in  the  comparative  value  of 
gold  and  silver  will  be  changes  in  the  state  of  the  latter  rather 
than  in  that  of  the  former." 

This  prophecy  of  Hamilton's  was  fulfilled  to  the  letter 
within  a  few  years  after  the  words  were  littered. 

But  in  these  words  also  we  find  the  excuse  for  the  adop- 
tion of  a  system  of  bimetallism  which,  after  the  expression  of 
a  preference  for  gold,  might  have  seemed  undesirable.  If  a 
farmer  is  seeking  for  one  of  two  pieces  of  land,  he  will  be 
obliged  to  select  that  which  is  within  his  means.  The 
United  States  was  in  the  same  position  as  the  farmer.  There 
was  a  general  scarcity  of  specie  in  the  new  country,  and  it 
was  a  difficult  matter  to  perform  the  exchanges  with  ease. 
'Eoi  only  was  there  no  prejudice  against  silver,  but  it  was 
the  metal  most  in  common  use.  The  whole  object  of  the 
Secretary  was  to  secure  a  metallic  medium  in  abundance; 
silver,  being  in  use,  must,  of  course,  be  retained,  and  gold 
brought  in  also,  if  possible.  The  double  standard  was  pre- 
ferred, therefore,  because  it  afforded  a  moral  certainty  of  the 
retention  of  silver  and  a  possibility  also  of  adding  gold  to 
the  money  of  the  land.  It  would  not  do,  says  Hamilton,  to 
adopt  a  single  silver  standard,  for  that  would  act  "  to  abridge 
the  quantity  of  the  circulating  medium."  It  was  hoped  to 
utilize  the  existing  quantity  of  silver,  and  yet  keep  the  gold 
also.  Although  he  preferred  a  single  standard  of  gold,  he 
must  be  content  to  take  what  he  could  get ;  and  silver  was 
most  easily  secured  for  the  new  currency.  There  is,  he  adds, 
an  extraordinary  supply  of  silver  in  the  West  Indies,^  and 

*  "  But  our  situation  in  regard  to  the  West  India  Islands,  into  some  of  which 
there  is  a  large  influx  of  silver  directly  from  the  mines  of  South  America,  occa- 
sions an  extraordinary  supply  of  that  metal,  and  consequently  [since  our  trade 
with  the  West  Indies  was  important]  a  greater  proportion  of  it  in  our  circula* 
tion  than  might  .have  been  expected  from  its  relative  value." 


THE  SILVER  PERIOD.  15 

this  will  render  it  easier  for  the  United  States  to  obtain  a 
supply  of  that  metal.  He  had  little  conception  of  the  com- 
ing effect  on  his  system  of  this  "  extraordinary  supply  "  of 
silver  from  the  South  American  mines.  The  scarcity  of 
metallic  money  was  the  fact  which  influenced  him  in  his  rec- 
ommendation of  a  double  standard — a  natural  scarcity,  too,  for 
the  country  yet  felt  the  effects  of  the  havoc  caused  by  the 
worthless  continental  paper  which  had  driven  specie  out  of 
use.  Like  the  farmer  of  limited  means,  who  preferred  the 
better  although  more  expensive  land,  but  took  the  cheaper 
piece  because  it  was  within  his  reach,  Hamilton  naturally 
adopted  the  poor-country  plan,^  and,  in  order  to  secure  a  me- 
tallic currency,  took  measures  to  retain  silver,  the  best  he 
could  get  (with  the  hope  of  keeping  gold  also). 

§  3.  Having,  for  these  reasons,  fully  decided  to  adopt  a 
double  standard,  the  Secretary  was  obliged  to  face  the  chief 
difficulty  in  the  problem — the  selection  of  a  legal  ratio  between 
gold  and  silver.  Here  was  the  rock  on  which,  as  we  shall  see 
hereafter,  his  system  was  inevitably  bound  to  go  to  pieces. 

In  selecting  a  ratio  between  gold  and  silver  in  our  coin- 
age there  is  not  a  reasonable  doubt  but  that,  in  spite  of  later 
charges,  Hamilton  fully  intended  to  keep  as  closely  as  possi- 
ble to  the  market  ratio  in  the  United  States. 

"  There  can  hardly  be  a  better  rule  in  any  oountry  for  the 
legal  than  the  market  proportion,  if  this  can  be  supposed  to 
have  been  produced  by  the  free  and  steady  course  of  commer- 
cial principles.  The  presumption  in  such  case  is,  that  each 
metal  finds  its  true  level,  according  to  its  intrinsic  utility,  in 
the  general  system  of  money  operations," 

'  In  the  Report  of  the  Committee  to  Congress  in  1785  (see  p.  12)  the 
same  idea  was  uppermost.  They  saw  that  the  French  ratio  of  1:15  attracted 
silver  to  France  from  England  and  Spain,  where  silver  had  a  less  value  (viz., 
1 ;  15'2  in  England  and  1 :  16  in  Spain) ;  consequently  it  was  urged  that  a  ratio 
like  the  French,  or  even  1 :  14 •'75,  would  be  likely  to  draw  silver  to  the  United 
States  from  England  and  Spain,  and  thereby  increase  the  chances  of  gaining 
enough  of  this  metal  to  satisfy  our  needs.  Jefferson  also,  in  1V82,  seeing  that 
France  lost  gold,  but  England  and  Spain  lost  silver,  thought  it  well  to  adopt  a 
ratio  of  1 :  15,  because,  as  our  commerce  was  chiefly  with  Spain,  we  should  receive 
silver  readily  from  Spain,  where  the  ratio  was  unfavorable  to  silver  [1 :  16], 


16  THE  UNITED  STATES,    1792-1873. 

Having  decided  to  adopt  the  market  ratio,  he  found  an 
alternative  between  (1)  the  market  ratio  of  "  the  commercial 
world  "  and  (2)  the  market  ratio  solely  of  the  United  States. 
He  frankly  admitted  his  inability  to  discover  the  former. 
"  To  ascertain  the  first  with  precision  would  require  better 
materials  than  are  possessed,  or  than  could  be  obtained,  with- 
out an  inconvenient  delay. "  ^  Here  he  committed  a  grave 
financial  error.  No  system  of  bimetallism  has  been  able  to 
exist  for  any  length  of  time  in  a  country  trading  with  foreign 
states,  if  the  Mint  ratio  was  not  in  agreement  with  the  market 
ratio  of  the  chief  commercial  nations.  Hamilton  certainly 
did  not  then  foresee  this  difficulty.  On  a  matter  of  mone- 
tary principles  he  was  wholly  wrong.  He  should  have  made 
the  inquiry  in  regard  to  the  relative  values  current  in  "  the 
commercial  world  "  with  great  care ;  for,  if  he  had  no  time 
to  conduct  such  an  investigation,  it  was  certain  that  his 
bimetallic  system  would  soon  be  disturbed.  But,  as  we 
shall  soon  learn,  he  was  led  to  that  which  was  right  in 
fact,  although,  on  a  matter  of  principles,  he  was  wholly  in 
error. 

The  object  he  set  before  him,  then,  was  the  ascertainment 
of  the  current  ratio  between  gold  and  silver  in  the  United 
States,  irrespective  of  the  relative  values  of  the  two  metals  in 
foreign  lands.  This,  however,  was  no  easy  matter.  Morris 
had  stated  the  ratio  to  be  1 :  14|,  and  Jefferson  1 :  14| ;  but 
Hamilton  found  that  there  was  a  customary  ratio  ^  between 
gold  and  silver  coins  in  the  United  States  of  1 :  15*6,  although 

*  Mr.  Upton,  it  seems  to  me,  is  in  error  when  he  says  ("  Money  in  Politics," 
p.  S9) :  "  He  admitted  that  if  the  ratio  between  the  metals  should  not  prove  to 
be  the  commercial  one,  there  was  hope  of  retaining  only  the  overvalued  metal 
in  circulation.  He  asserted  his  belief,  however,  that  1:15  would  prove  to  he  the 
commercial  ratio.^^ 

*  Hamilton  explains  the  prevalence  of  this  ratio  by  the  fact  that  it  arose 
from  a  custom  existing  in  years  before  of  comparing  gold  coins  with  earlier 
issues  of  Spanish  Seville  pieces  (386|  grains  of  pure  silver),  which  contained 
more  pure  silver  than  the  Spanish  dollars  current  in  1791.  The  Board  of 
Treasury  also  ("Report  of  1878,"  p.  449)  gave  1 :  15*6  as  the  ratio  in  common 
use  in  1786. 


THE  SILVER  PERIOD.  17 

this  ratio  was  not  based  on  the  weight  of  Spanish  dollars 
coined  at  this  time.*  The  weight  of  the  Spanish  dollars 
varied,  in  truth,  within  very  wide  limits,  and  yet  had  the 
same  nominal  value.  As  early  as  1717  the  assays  of  Sir  Isaac 
Newton,  at  the  English  Mint,  gave  the  following  results : 

Seville  piece  of  eight 3S7    gr.  pure  silver. 

Mexican  piece  of  eight 385^      "  " 

Pillar  dollar 385|      "  " 

New  Seville  piece  of  eight... SOS-jV    "  " 

The  Spanish  government  issued  its  later  coins  of  less 
weight  than  its  older  ones.^  Then,  also,  worn  coins  con- 
tained less  silver  than  fresh  ones,  so  that  for  many  reasons 
the  dollar  did  not  represent  any  definite  weight  of  silver. 
In  speaking  of  these  coins,  Hamilton  remarks : 

"  That  species  of  coin  has  never  had  any  settled  or  standard 
value,  according  to  weight  or  fineness,  but  has  been  permitted 
to  circulate  by  tale,  without  regard  to  either,  very  much  as  a 
mere  money  of  convenience,  while  gold  has  had  a  fixed  price 
by  weight,  and  with  an  eye  to  its  fineness.  This  greater  sta- 
bility of  value  of  the  gold  coins  is  an  argument  of  force  for 
regarding  the  money  unit  as  having  been  hitherto  virtually 
attached  to  gold  rather  than  to  silver. 

"  Twenty-four  grains  and  six  eighths  of  a  grain  of  fine  gold 
have  corresponded  with  the  nominal  value  of  the  [silver]  dollar 
in  the  several  States,  without  regard  to  the  successive  diminu- 
tions of  its  intrinsic  worth. 

"  But  if  the  [silver]  dollar  should,  notwithstanding,  be  sup- 
posed to  have  the  best  title  to  being  considered  as  the  present 

'  In  1782,  Robert  Morris  reported  that  the  best  assays  to  his  knowledge 
made  the  dollar  in  general  circulation  to  contain  about  373  grains  of  pure 
silver.  In  1785,  a  committee  reported,  and  Congress  adopted,  a  plan  for  a 
dollar  of  362  grains,  but  it  was  not  carried  out.  The  Board  of  Treasury,  in 
1786,  proposed  a  dollar  of  375-64  grains.  See  "Report  of  1878,"  pp.431, 
447,  449. 

'  Gallatin,  in  a  letter  to  Mr.  Ingham,  Secretary  of  the  Treasury  (Decem- 
ber 31,  1829),  says:  "The  present  rate  (1 :  15)  was  the  result  of  information 
clearly  incorrect  respecting  the  then  relative  value  of  gold  and  silver  in  Eu- 
rope, which  was  represented  as  being  at  the  rate  of  less  than  15  to  1,  when  it 
was  in  fact  from  15-5  to  15-6  to  1"  ("Report  of  1878,"  p.  591).  But  Ham- 
ilton  did  not  attempt  to  adjust  his  ratio  according  to  the  ratio  prevalent  in 
Europe. 


18  THE  UNITED   STATES,  1792-1873. 

unit  in  the  coins,  it  would  remain  to  determine  what  kind  of 
dollar  ought  to  be  understood."^ 

It  seemed,  therefore,  to  be  definitely  understood  that  2if 
grains  of  fine  gold  stood  as  the  recognized  equivalent  of  a 
silver  dollar ;  and  with  this  starting-point  Hamilton,  having 
already  selected  the  ratio  of  1 :  15  between  the  coins,  would 
be  led  a  priori  to  determine  that  the  silver  dollar  ought  to 
contain  15  X  21-|  grains  of  fine  silver,  or  371^  grains.  And, 
ill  all  probability,  this  was  the  process  by  which  he  arrived 
at  his  conclusion.  He  announced  that  the  later  issues  of 
dollars  from  the  Spanish  mint  had  contained  374  grains 
of  fine  silver,  and  the  latest  issues  only  368  grains,  which 
implied  a  current  market  ratio  in  the  United  States  (if 
these  dollars  exchanged  for  24f  grains  of  fine  gold)  of 
from  1 :  15 '11  to  1 :  11:"87,  or  a  mean  ratio  of  about  1 :  15. 
Of  this  ratio  Hamilton  says  it  is  "  somewhat  more  than 
the  actual  or  market  proportion,  which  is  not  quite  1 :  15." 
But,  throughout  his  inquiry,  no  one  can  doubt  but  that  he 
was  honestly  seeking  for  a  ratio  as  near  as  possiljle  to_that 
existing  in  the  markets  of  the  United  States.  He  cer- 
tainly can  not  be  charged  with  an  intention  of  underrating 
gold. 

In  later  years,  however,  Hamilton  was  vehemently  at- 
tacked by  Benton^  (during  the  controversy  on  the  second 
United  States  Bank)  because  of  an  alleged  intention  to  favor 
silver  in  preference  to  gold  by  his  ratio,  in  order  to  drive  out 
gold  and  encourage  the  use  of  paper  substitutes  for  the  less 
portable  and  heavier  metal,  silver.  There  seem  to  be  no 
just  grounds  for  this  reflection  on  Hamilton's  purposes. 
Benton,  in  his  day,  saw  gold  disappearing ;  but  the  cause  of 
it  was  as  unknown  to  him  as  it  was  to  Hamilton,  although  it 
was  in  operation  in  1791,  when  bimetallism  was  adopted. 
To  learn  what  this  cause  was,  it  will  be  suitable  first  to  give 
a  statement  from  sources  now  accessible  to  us  of  the  actual 

»  "Report  of  1878,"  p.  456. 

*  Ibid.,  p.  484.     Cf.  also  Horton's  note,  p.  460. 


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lOS  OF  GOLD  TO  SILVER  FROM  1 780  TO 

FALL  IN  VALUE  OF  SILVER. 

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THE  SILVER  PERIOD. 


19 


ratios  of  gold  to  silver  during  this  time,  when  a  coinage  sys- 
tem was  being  established. 

The  relative  values  between  gold  and  silver,  computed 
by  Dr.  Soetbeer  from  absolutely  credible  sources  in  the  offi- 
cial quotations  twice  a  week  of  the  prices  of  silver  at  Ham- 
burg, are  the  most  reliable.  About  1780,  Hamburg  was  a 
much  more  important  silver  market  than  was  London,  al- 
though in  later  years  the  English  city  has  easily  taken 
the  lead  of  all  other  markets.  Another  table  of  ratios 
was  compiled  in  1829  by  John  White,  cashier  of  the 
United  States  Bank,  covering  the  years  from  1760  to  1829. 
It  is  unquestionably  full  of  errors,  and  quite  untrustworthy, 
but  has  been  quoted  by  vari- 
ous American  writers  and  offi- 
cials as  if  it  were  trustworthy. 
For  this  reason,  in  the  discussion 
of  the  years  from  1780  to  1800, 
both  tables  ^  will  be  quoted,  and 
the  reader  can  make  his  own 
comparisons  : 

The  movement  of  silver  rela- 
tively to  gold,  as  shown  by  these 
tables,  may  be  best  seen  in  Chart 
I.  A  downward  tendency  in  the 
value  of  silver  relatively  to  gold, 
beginning  soon  after  1780,  is  the 
marked  characteristic  of  this  pe- 
riod. The  horizontal  line  drawn 
across  the  chart  indicates  the 
place  of  the  ratio  of  15  : 1  proposed  by  Hamilton,  and  it  can  be 
seen  by  comparison  with  this  line  whether  the  market  ratios 
corresponded  with  1 :  15.     The  line  based  on  the  Hamburg 


Tear. 

Soetbeer. 

White. 

1780 

14-72  :  1 

14-30  :  1 

ri781 

J  1782 
^1  1783 

14-78 

13-70 

14-42 

13-42 

14-48 

13-66 

[1784 

14-70 

14-77 

1785 

14-92 

15-07 

1786 

14-96 

14-76 

1787 

14-92 

14-70 

1788 

14-65 

14-58 

1789 

14-75 

14-76 

1790 

15-04 

14-88 

1791 

15-05 

14-82 

1792 

15-17 

14-30 

1793 

15-00 

14-83 

1794 

15-37 

15-18 

1795 

15-65 

14-64 

1796 

15-65 

14-64 

1797 

15-41 

15-31 

1798 

15-59 

15-31 

1799 

15-74 

14-14 

1800 

15-68 

14-68 

'  These  tables  are  collected  and  given  in  full  in  Appendix  IT,  together  with 
Cashier  White's  figures,  and  critical  notes  on  some  of  the  ratios.  All  the 
evidence  we  have  goes  to  confirm  the  Hamburg  quotations  as  generally  reli- 
able, and  to  show  White's  figures  to  be  almost  utterly  worthless. 

*  See,  for  critical  note  on  these  years,  Appendix  II. 


20  THE  UNITED  STATES,  1V92-1873. 

quotations  shows  that  the  market  ratios  remained  at  about 
the  line  of  1 :  15  in  the  years  from  1790  to  1Y93,  the  very 
time  during  which  our  system  was  established ;  but  it  will 
be  noticed  at  once  that,  after  1793,  silver  began  a  steady  fall 
relatively  to  gold,  and  never  thereafter  in  this  period  did 
it  return  to  the  ratio  of  1 :  15.  It  was  a  very  short  time, 
indeed,  that  the  ratio  of  "  the  commercial  world  "  remained 
near  Hamilton's  choice.  Of  this  gradual  tendency  of  silver 
to  change  its  value  relatively  to  gold  Hamilton,  of  course, 
did  not  know.  Had  he  known  of  it,  he  must  have  foreseen 
the  subsequent  action  of  Gresham's  law  (by  which  the  cheaper 
metal  drives  out  the  dearer),  and  the  establishment  of  a  single 
silver  standard,  instead  of  the  single  gold  standard  which  he 
preferred.  Without  knowing  it,  he  was  dealing  with  a  metal 
even  then  shifting  in  value ;  and,  without  intending  it,  he  es- 
tablished a  ratio  which  could  accord  with  the  market  rate  for 
only  a  very  inconsiderable  time.  Hamilton's  attempt  was 
like  that  of  a  man  who  should  try  to  build  a  house  on 
the  banks  of  the  great  glaciers  in  the  Alps,  which  slowly 
but  constantly  move  onward  within  their  mountain  chan- 
nels, and  who  should  yet  expect  to  maintain  fixed  and  un- 
changed relations  in  his  house  with  the  surface  of  the  mov- 
ing ice. 

§  4.  Having  supplied  ourselves  with  a  knowledge  of  the 
actual  condition  of  things  on  which  Hamilton  was  erecting 
his  bimetallic  system,  we  can  now  look  closer  into  the  plan 
which  was  adopted  by  Congress  and  put  into  operation  in 
1792.  His  report  ^  draws  the  following  conclusions,  on  which 
the  act  was  based  : 

"  That  the  unit  in  the  coins  of  the  United  States  ought  to 
correspond  with  24  grains  and  f  of  a  grain  of  pure  gold,  and 
with  371  grains  and  ^  of  a  grain  of  pure  silver,  each  answer- 
ing to  a  dollar  in  the  money  of  account.  The  former  is  ex- 
actly agreeable  to  the  present  value  of  gold,  and  the  latter  is 
within  a  small  fraction  of  the  mean  of  the  two  last  emissions 
of  dollars — the  only  ones  which  are  now  found  in  common  cir- 

>  See  "  Report  of  18Y8,"  p.  478. 


THE  SILVER  PERIOD.  21 

culation,  and  of  which  the  newest  is  in  the  greatest  abundance. 
The  alloy  in  each  case  to  be  one  twelfth  of  the  total  weight, 
which  will  make  the  unit  27  grains  of  standard  ^  gold  and  405 
grains  of  standard  silver."  * 

In  carrying  out  this  plan  in  the  act  of  April  2,  1Y92, 
Congress^  deviated  slightly  from  the  recommendations.  The 
alloy  in  the  silver  dollar  was  not  made  one  twelfth,  but  about 
one  ninth,  by  fixing  the  standard  weight  at  416  grains.  The 
original  silver  dollar,  therefore,  weighed  116  grains  (not  112|-), 
and  contained  371:|^  grains  of  pure  silver.  No  gold  dollar 
pieces  were  authorized ;  but  the  eagle,  or  ten-dollar  piece,  was 
made  the  basis  of  our  gold  coins.  The  eagle  was  to  contain 
270  grains  of  standard  coin  and  21T'5  grains  of  pure  gold  ; 
so  that  one  gold  dollar  would  have  weighed  27  grains,  and 
contained  21' 75  grains  of  pure  gold.  Fifteen  times  21" 75 
grains  gives  371:^  grains,  the  weight  of  pure  metal  in  the 
silver  dollar,  making  the  ratio  between  the  pure  metals  in 
our  coins  1 :  15,  as  intended  by  Hamilton.  The  ratio,  of 
course,  is  never  estimated  on  the  standard  weights  in  the 
coins. 

The  subsidiary  silver  coins,  or  those  of  denominations  be- 
low one  dollar,  were  established  of  a  weight  and  fineness 
corresponding  to  that  of  the  dollar  piece.     That  is,  two  halves, 

'  "  Standard  "  is  the  term  applied  to  the  pure  metal  mixed  with  the  alloy. 
The  actual  weight  of  a  finished  coin,  of  course,  contains  a  certain  weight  of  fine 
or  pure  metal,  plus  the  alloy.  England,  Spain,  Portugal,  and  France  then  put 
an  alloy  of  one  twelfth  of  the  total,  or  standard,  weight  into  their  gold  coins. 
(See  "Report  of  ISTS,"  p.  466.)  The  origin  of  this  fraction  is  in  the  use  of 
carats^  Twenty-four  carats  fine  is  a  standard  of  pure  gold,  and  these  countries 
adopted  as  the  standard  of  fineness  in  their  gold  coins  twenty-two  carats,  or  ff , 
or  j^.     Reduced  to  the  decimal  system,  \^  is  916'66  thousandths  fine. 

'  Although  Hamilton  recommended  the  same  alloy  for  silver  as  for  gold 
coins,  for  some  reason  Congress  did  not  carry  out  the  suggestion.  Instead  of 
adding  alloy  to  371^  grains  of  pure  silver,  so  as  to  make  the  standard  weight 
405  grains  (which  would  have  been  one  twelfth  alloy),  Congress  fixed  the  stand- 
ard weight  of  the  silver  dollar  at  416  grains,  thus  establishing  a  fraction  a  little 
more  than  one  ninth  of  alloy  (or,  in  the  decimal  system,  892 '43  thousandths 
fine).  The  same  was  true  of  the  subsidiary  silver  coins,  or  denominations  below 
one  dollar. 

'  For  the  provisions  of  the  act  at  length,  see  Appendix  III. 


22  THE   UNITED  STATES,  1792-18Y3. 

four  quarters,  ten  dimes,  or  twenty  half-dimes,  contained  as 
many  grains  (371^)  of  pure  silver  as  did  the  one-dollar  j)iece. 
Therefore,  as  we  shall  see  later,  whenever  anything  happened 
to  affect  the  circulation  of  the  dollar  piece,  it  equally  affected 
the  subsidiary  coinage.  This,  as  is  now  well  known,  was  an 
error,  and  subsequently  resulted  in  the  disappearance  of  all 
coins  used  for  "  small  change." 

It  was  also  enacted  (Sec.  14)  that  "  it  shall  be  lawful  for 
any  person  or  persons  to  bring  to  the  said  Mint  gold  and  sil- 
ver bullion,  in  order  to  their  being  coined."  These  words 
contain  the  important  privilege  known  as  "  Free  Coinage," 
by  which  is  meant  the  right  of  any  private  person  to  have 
bullion  coined  at  the  legal  rates.  If  the  Government  reserves 
to  itself  this  right,  there  would  not  be  free  coinage.  This  is 
a  matter  of  importance,  because  through  it  alone  can  Gresh- 
am's  law  have  an  immediate  effect.  If  there  is  a  profit  in 
sending  one  of  two  legal  metals  to  the  Mint,  and  in  with- 
drawing the  other,  with  the  result  of  displacing  one  of  the 
metals  in  circulation  with  another,  it  is  necessary,  of  course, 
that  access  to  the  Mint  should  be  free  to  any  one  who  sees 
this  chance  of  profit. 

Free  coinage,  however,  is  to  be  distinguished  from  the 
absence  in  the  act  of  any  charge  for  "  seigniorage,"  as  ex- 
pressed  in  the  words :  "  And  that  the  bullion  so  brought  shall 
be  there  assayed  and  coined  as  speedily  as  may  be  after  the 
receipt  thereof,  and  that  free  of  expense  to  the  person  or  per- 
sons by  whom  the  same  shall  have  been  brought."  Seignior- 
age is  a  charge  exacted  from  persons  for  coining  their  bull- 
ion into  coins  at  the  Mint ;  but  no  such  charge  was  exacted 
in  this  act  of  1Y92. 

The  legal-tender  power  was  granted  to  both  gold  and  sil- 
ver coins,  and  subsidiary  coinage  as  well,  to  an  unlimited  ex- 
tent, in  these  words  (Sec.  16)  :  "  All  the  gold  and  silver  coins 
which  shall  have  been  struck  at,  and  issued  from,  the  said 
Mint  shall  be  a  lawful  tender  in  all  payments  whatsoever, 
according  to  the  respective  values  hereinbefore  declared,  and 
those  of  less  than  full  weight  at  values  proportional  to  their 


THE  SILVER  PERIOD.  23 

respective  weiglits."  As  regards  the  subsidiary  coins  this  was 
an  error,  from  the  point  of  view  of  all  later  experience.  That 
subsidiary  coins  should  be  an  unlimited  tender  to  any  amount, 
however,  when  of  equal  value  with  the  dollar  piece,  could  not 
create  much  annoyance. 

Such  was  the  bimetallic  system  established,  soon  after  the 
foundation  of  our  Government,  in  1792.  There  probably 
never  was  a  better  example  of  the  double  standard,  one  more 
simple,  or  one  for  whose  successful  trial  the  conditions  could 
have  been  more  favorable.  There  was  no  prejudice  among 
the  people  against  the  use  of  either  gold  or  silver.  The  rela- 
tive values  of  the  two  metals  had  been  fairly  steady  for  a 
long  time  in  the  past.  At  the  start  everything  seemed  fair. 
The  real  difficulty  which  the  future  disclosed  was  one  inher- 
ent in  a  system  based  upon  the  concurrent  use  of  two  met- 
als, each  of  which  is  affected  by  causes  independent  of  the 
other.  The  difficulty  was  certainly  not,  as  some  would  have 
us  believe,  in  the  selection  of  a  wrong  ratio.  Knowing,  as 
we  now  do,  that  the  ratio  between  gold  and  silver  began  to 
change,  as  if  for  a  long-continued  alteration  of  their  rela- 
tions, at  the  very  time  when  Hamilton  was  setting  up  a 
double  standard,  and  learning,  as  we  have,  that  he  declined, 
from  lack  of  time,  to  ascertain  the  market  ratio  for  "  the 
commercial  world,"  we  are  prepared  to  find  that,  as  he  was 
wrong  in  theory,  he  was  also  wrong  in  the  ratio  he  selected 
with  so  narrow  a  view.  This,  however,  is  not  true.  It  hap- 
pened that  the  ratio  he  adopted,  on  the  sole  ground  that  it 
was  near  to  the  current  relation  ^  in  the  United  States,  was  also, 
by  a  piece  of  good  fortune,  as  near  as  could  be  expected  to  the 
ratio  of  "  the  commercial  world."  By  reference  to  the  Ham- 
burg tables  it  will  be  seen  that  European  prices  during  the 
four  years  from  1T90  to  1793  (inclusive)  gave  a  market  ratio 
of  almost  exactly  1 :  15.  Indeed,  if  Hamilton  had  taken  the 
European  market  into  account,  it  is  difficult  to  understand 


'  Jefferson  approved  of  Hamilton's  choice  of  1 :  15.     Cf.  "  Report  of  18'78," 
p.  486. 


24: 


THE   UNITED  STATES,   1792-1873. 


what  other  ratio  he  could  properly  have  adopted.^  As  a  mat- 
ter of  fact,  his  legal  ratio  corresponded  with  the  market  ratio 
when  his  plan  went  into  operation.  As  a  matter  of  Hamil- 
ton's own  monetary  skill,  it  was  surely  but  a  hand-to-mouth 
policy ;  for  a  ratio  different  from  that  of  the  commercial  world 
would  have  been  wholly  unjustified  by  connect  monetary  rules. 

§  5.  We  must  now  accompany  the  new  coinage  system  in 
the  course  of  its  experience  during 
the  first  period  of  its  history.  The 
young  and  promising  offspring  of 
Hamilton  started  well,  but  soon  be- 
gan to  limp,  and  then  to  walk  on 
only  one  leg.  We  must  therefore 
investigate  the  cause  of  this  trouble. 
In  calling  attention  to  Chart  I  it 
was  noticed  that  the  relative  values 
of  gold  and  silver  began  to  change 
soon  after  1780 ;  that  relatively  to 
gold  the  value  of  silver  fell  (or,  not 
to  prejudge  the  case,  the  value  of 
gold  rose  relatively  to  silver)  until 
in  the  last  five  years  of  the  century 
the  ratio  remained  in  the  vicinity  of 
1 :  15*5.  By  continuing  the  table  of 
figures  from  1800  to  1833,  the  peri- 
od represented  by  the  chart,  it  will 
be  possible  to  see  the  extent  and  di- 
rection of  further  changes  in  this 
season  of  trial  for  the  new  system. 
As  already  observed,  the  market  val- 
ue, according  to  Hamburg  prices  of 
silver,  never  rose  after  1Y93  to  the 


Tear. 
1801 

Soetbeer. 

White. 

15-46:1 

14-33:1 

1802 

15-26 

15-09 

1803 

15-41 

14-33 

1804 

15-41 

14-54 

1805 

15-79 

15-00 

1806 

15-52 

14-12 

1807 

15-43 

14-33 

1808 

16-08 

14-66 

1809 

15  96 

16-00 

1810 

15-77 

16-00 

1811 

15-53 

15-58 

1812 

16-11 

14-09 

1813 

16-25 

14-04 

1814 

15-04 

15-71 

1815 

15-26 

16-15 

1816 

15-28 

13-52 

1817 

15-11 

15-44 

1818 

15-35 

15-28 

1819 

15-33 

15-68 

1820 

15-62 

15-57 

1821 

15-95 

15-84 

1822 

15-80 

15-77 

1823 

15-84 

15-77 

1824 

15-82 

15-05 

1825 

15-70 

15-55 

1826 

15-76 

15-05 

1827 

15-74 

15-63 

1828 

15-78 

15-63 

1829 

15-78 

15-81 

1830 

15-82 

1831 

15-72 

.  .  .  • 

1832 

15-73 

1833 

15-93 



'  Even  if  we  take  the  untrustworthy  figures  of  White,  we  find  that  the  ratio 
was  below  1  ;  15,  and  had  been  since  1786.  Therefore  it  can  not  be  charged 
by  Benton  that  Hamilton  favored  silver  by  the  ratio  of  1 :  1 3,  since  this  ratio 
gave  gold  an  exchange  value  in  the  coins  greater  than  that  in  the  market  (so  far 
as  White's  table  goes). 


THE  SILVER  PERIOD.  25 

ratio  of  1  :  15  (indicated  by  the  horizontal  line),  within  this 
period  which  extends  to  1833  (although  it  came  nearest  to 
it  in  1814  and  1817).  After  1820  there  was  a  lower  level 
in  the  relative  value  of  silver  to  gold,  indicating  a  more  or 
less  permanent  change  in  the  relations  of  the  two  metals,  at 
a  rate  between  1 :  15|  and  1 :  16.  The  decline  after  1793  was 
steady,  broken  by  a  rally  in  1803-1805,  and  followed  by  a 
fall  below  1 :  16  in  1813.  These  are  the  simple  facts,  taken 
from  the  most  trustworthy  sources,  concerning  the  rela- 
tive values  of  gold  and  silver  in  the  first  period  after  Ham- 
ilton established  his  system  in  1782.  Thus  was  fulfilled  his 
prophecy :  "  The  revolution,  therefore,  which  may  take  place 
in  the  comparative  value  of  gold  and  silver  will  he  changes  in 
the  state  of  the  latter  rather  than  in  that  of  the  former." 

Without  stopping  now  to  consider  the  cause  of  this  change 
in  the  relations  of  gold  and  silver,  it  will  be  best  to  explain 
the  effects  of  this  change — no  matter  what  its  cause — upon  the 
coinage  of  the  United  States.  The  situation  now  resembles 
that  of  a  man  who,  having  balanced  a  lever  on  a  fulcrum,  and 
then,  after  having  lengthened  one  arm  and  shortened  the 
other,  should  expect  the  lever  to  balance  on  the  fulcrum  in 
the  same  manner  as  before.  We  now  have  an  illustration  of 
Gresham's  law — that  when  two  metals  are  both  legal  tender, 
the  cheaper  one  will  drive  the  dearer  out  of  circulation. 
This  can  not  operate,  however,  unless  there  is  "  free  coinage," 
and  unless  there  is  such  a  divergence  between  the  mint  and 
the  market  ratios  of  gold  and  silver  as  will  secure  to  the 
money-brokers  a  profit  by  exchanging  one  kind  of  coins  for 
the  other.  But,  as  we  have  already  seen,  "  free  coinage " 
existed,  and  a  profitable  difference  ^  between  the  mint  and  the 
market  ratios  in  the  United  States  appeared  about  as  early  as 
1810. 

'  Mr.  Baring,  the  banker,  testified :  "  A  very  slight  difference  of  one  tenth 
or  one  fourth  per  cent  would  determine  the  use  of  one  metal  or  another." — 
Quoted  by  C.  P.  White,  p.  43  of  "H.  R.  Report  No.  278,"  vol.  ii,  1833-1834,  1st 
session,  23d  Congress.  In  speaking  again  of  this  report  I  shall  describe  it  as 
"Report  No.  278,  1833-1834." 


26  THE  UNITED   STATES,   1792-1873. 

The  operation  of  Gresham's  law  is  in  reality  a  very  sim- 
ple matter.  If  farmers  found  that  in  the  same  village  eggs 
were  purchased  at  a  higher  price  in  one  of  two  shops  than 
in  the  other,  it  would  not  be  long  before  they  all  carried 
their  baskets  to  the  first  shop.  Likewise,  in  regard  to  gold 
or  silver,  the  possessor  of  either  metal  has  two  places  where 
he  can  dispose  of  it — the  United  States  Mint,  and  the  bullion 
market ;  he  can  either  have  it  coined  and  receive  in  new 
coins  the  legal  equivalent  for  it,  or  sell  it  as  a  commodity  at  a 
given  price  per  ounce.  If  he  finds  that  silver  in  the  form 
of  United  States  coins  buys  more  gold  than  he  could  pur- 
chase with  the  same  amount  of  silver  in  the  bullion  mar- 
ket, he  sends  his  silver  to  the  Mint  rather  than  to  the  bull- 
ion market.  By  reference  to  Chart  I,  it  will  be  seen  that 
the  market  value  of  silver  relatively  to  gold  had  fallen  to 
1 :  16,  while  at  the  Mint  the  ratio  was  1 :  15.  That  is,  in  the 
market  it  required  sixteen  ounces  of  silver  to  buy  one 
ounce  of  gold  bullion ;  but  at  the  Mint  the  Government 
received  fifteen  ounces  of  silver,  and  coined  it  into  silver 
coins  which  were  legally  equivalent  to  one  ounce  of  gold. 
The  possessor  of  silver  thus  found  an  inducement  of  one 
ounce  of  silver  to  sell  his  silver  to  the  Mint  for  coins,  rather 
than  in  the  market  for  bullion.  But  as  yet  the  possessor 
of  silver  had  only  got  silver  coins  from  the  Mint.  How 
was  he  to  realize  his  gain  ?  Will  people  give  the  more 
valuable  gold  for  his  less  valuable  silver  coins?  To  some 
minds  there  is  a  difficulty  in  understanding  how  a  cheaper 
dollar  is  actually  exchanged  for  a  dearer  dollar.  This  also 
is  simple.  The  mass  of  people  do  not  follow  the  market 
values  of  gold  and  silver  bullion,  nor  calculate  arithmetically 
when  a  profit  can  be  made  by  buying  up  this  or  that  coin. 
The  general  public  know  little  about  such  things,  and  if  they 
did,  a  little  arithmetic  would  deter  them.  These  matters  are 
relegated  by  common  consent  to  the  money-brokers,  a  class 
of  men  who,  above  all  others,  know  the  value  of  a  small 
fraction  and  the  gain  to  be  derived  from  it.  Ordinary  per- 
sons hand  out  gold  or  silver,  when  they  are  in  concurrent 


THE  SILVER  PERIOD.  27 

circulation,  under  the  supposition  that  the  intrinsic  value  of 
gold  is  just  equal  to  the  intrinsic  value  of  silver  in  the  coins, 
according  to  the  legal  ratio  expressed  in  the  coins.  If,  under 
such  conditions,  silver  falls  as  above  described,  the  monej- 
broker  will  continue  to  present  silver  bullion  at  the  Mint, 
and  the  silver  coins  he  receives  he  can  exchange  for  gold 
coins  as  long  as  gold  coins  remain  in  common  circulation — 
that  is,  as  long  as  gold  coins  are  not  withdrawn  by  every  one 
from  circulation.  Having  now  received  an  ounce  of  gold  in 
coin  for  his  fifteen  ounces  of  silver  coin,  he  can  at  once  sell 
the  gold  as  bullion  (most  probably  melting  it,  or  selling  it  to 
exporters)  for  sixteen  ounces  of  silver  bullion.  He  retains 
one  ounce  of  silver  as  profit,  and  with  the  remaining  fifteen 
ounces  of  silver  goes  to  the  Mint  for  more  silver  coins,  ex- 
changes these  for  more  gold  coins,  sells  the  gold  as  bullion 
again  for  silver,  and  continues  this  round  until  gold  coins 
have  disappeared  from  circulation.  When  every  one  begins 
to  find  out  that  a  gold  eagle  will  buy  more  of  silver  bullion 
than  it  will  of  silver  dollars  in  current  exchanges,  then  the 
gold  eagle  will  be  converted  into  bullion  and  cease  to  pass 
from  hand  to  hand  as  coin.  The  existence  of  a  profit  in  sell- 
ing gold  coins  as  bullion,  and  presenting  silver  to  be  coined  at 
the  Mint,  is  due  to  the  divergence  of  the  market  from  the 
legal  ratio,  and  no  power  ^  of  the  Government  can  prevent 
one  metal  from  going  out  of  circulation.  Like  the  farmers 
with  their  eggs,  under  the  operation  of  Gresham's  law  silver 
will  be  taken  where  it  is  of  the  most  value  (the  United  States 

'  A  vivid  illustration  of  this  fact  is  given  in  Macaulay's  "  History  of  Eng- 
land," chap.  xxi.  About  1691,  new  coins  were  issued  of  full  weight  to  take 
the  place  of  the  worn  and  clipped  coins  which  caused  so  much  wrangling  in 
every  bargain ;  but  the  old  coins  and  the  new  were  equally  received  by  the 
state  for  government  dues.  There  was,  therefore,  a  premium  on  clipping 
the  new  coins,  if  the  old  and  clipped  coins  were  an  equally  good  tender  for 
taxes.  The  new  coins  disappeared  as  fast  as  they  came  from  the  Mint. 
Men  and  women  were  hanged  in  numbers  for  this  kind  of  money-making, 
but  the  trouble  went  on  as  before,  until  the  proper  remedy  was  applied  in 
1695  by  ceasing  to  receive  the  worn  and  clipped  coins  for  more  than  their  value 
by  weight. 


28  THE  UNITED   STATES,   1792-1873. 

Mint),  and  gold  will  be  sold  ^  where  it  brings  a  greater  value . 
than  as  coin  (the  bullion  market). 

In  the  preceding  explanation  of  Gresham's  law  I  have 
described  the  process  which  began  to  make  itself  felt  as  early 
as  about  1810.  The  date  itself  is  of  importance,  because 
some  writers  have  explained  the  operation  of  Gresham's  law 
and  the  disappearance  of  gold  by  causes  ^  which  can  be  ad- 
mitted as  the  true  ones  only  if  the  date  were  as  late  as  1819, 
the  year  when  the  English  Resumption  Act  was  passed. 
There  are,  however,  indisputable  proofs  that  the  change  in  the 
relations  of  the  two  metals  was  apparent  long  before  1819, 
and,  consequently,  long  before  the  English  demand  could 
have  been  felt.  Mr.  Lowndes  introduced  the  question  of  the 
disappearance  of  gold  from  the  currency  by  a  resolution  ^  in 
the  lower  house  of  Congress  as  early  as  ISTovember  27,  1818. 
Benton  *  distinctly  sets  an  earlier  date  by  stating  that  "  it  was 
not  until  the  lapse  of  near  twenty  years  after  the  adoption 
of  the  erroneous  standard  of  1792  that  the  circulation  of  that 
metal  [gold],  both  foreign  and  domestic,  became  completely 
and  totally  extinguished  in  the  United  States."     This  would 

'  "  The  most  extreme  instance  which  has  ever  occurred  was  the  case  of  the 
Japanese  currency.  At  the  time  of  the  treaty  of  1858,  between  Great  Britain, 
the  United  States,  and  Japan,  which  partially  opened  up  the  last  country  to 
European  trades,  a  very  curious  system  of  currency  existed  in  Japan.  The  most 
valuable  Japanese  coin  was  the  kobang,  consisting  of  a  thin  oval  disk  of  gold 
about  two  inches  long  and  one  inch  and  a  quarter  wide,  weighing  two  hundred 
grains,  and  ornamented  in  a  very  primitive  manner.  It  was  passing  current  in 
the  towns  of  Japan  for  four  silver  itzebus,  but  was  worth  in  English  money 
about  18s.  5c?.,  whereas  the  silver  itzebu  was  equal  only  to  about  Is.  ^d.  Thus 
the  Japanese  were  estimating  their  gold  money  at  only  about  one  third  of  its 
value,  as  estimated  according  to  the  relative  values  of  the  metals  in  other  parts 
of  the  world.  The  earliest  European  traders  enjoyed  a  rare  opportunity  for 
making  profit.  By  buying  up  the  kobangs  at  the  native  rating  they  trebled 
their  money,  until  the  natives,  perceiving  what  was  being  done,  withdrew  from 
circulation  the  remainder  of  the  gold." — Jevons,  "  Money  and  Mechanism  of 
Exchange,"  p.  84. 

*  See  infra,  chap,  iii,  §  5. 

3  On  which  a  report  was  made  January,  26,  1819.     3  Finance,  p.  398. 

*  "  Thirty  Years'  View,"  vol.  i,  chap.  cv.  Speech  on  the  revival  of  the 
gold  currency. 


THE  SILVER  PERIOD.  29 

fix  the  time  at  about  1812.  This  is  corroborated  by  Craw- 
ford/ Sec;'etary  of  the  Treasury,  who  asserts  that  a  change  in 
the  relative  vahies  had  taken  place  many  years  before  1820, 
When  we  recall  that  such  a  process  as  the  substitution  of 
one  metal  by  another  must  be  comparatively  slow,  especially 
in  a  new  and  sparsely  settled  country,  the  causes  must  have 
been  at  work  some  time  before,  if  we  read  in  a  report  to 
Congress  in  1821 :  "  On  inquiry,  they  find  that  gold  coins, 
both  foreign  and  of  the  United  States,  have,  in  a  great  meas- 
ure, disappeared."  ^  It  seems,  therefore,  to  be  clear  that 
gold  began  to  disappear  as  early  as  1810,  if  not  before,  and 
tliat  little  of  it  was  in  circulation  by  1818.^  Indeed,  since 
1793  there  existed  in  the  relative  values  of  gold  and  silver 
a  strong  reason  why  gold  should  not  circulate  in  the  United 
States,  and  why  Mr.  Lowndes  should  have  said  *  in  1819  : 

^  "  It  is  believed  that  gold,  when  compared  with  silver,  has  been /or  many 
years  appreciating  in  value." — In  a  "  Report  on  the  Currency,"  February  24, 1820. 
Cf.  "  Report  of  18Y8,"  p.  519.  "  In  the  autumn  of  the  year  1820  [November 
25]  an  article,  written  by  me,  was  published  in  your  gazette  ['  National  Ga- 
zette ']  explaining  the.  cause  of  the  disappearance  of  gold  from  the  United  States.'''' — 
Coudy  Raguet,  "  Currency  and  Banking,"  p.  207. 

^  And  they  add :  "  There  is  a  continual  and  steady  drain  of  that  metal  ■  from 
this  country."     See  "Report  of  1878,"  p.  554. 

2  "  It  is  a  notorious  fact  that  there  is  at  this  moment  a  traffic  carried  on 
between  the  United  States  and  Canada  more  destructive  to  our  national  inter- 
est than  an  evasion  of  the  embargo,  or  even  partially  supplying  the  enemy  with 
provisions,  as  its  effects  are  so  much  more  extensive.  We  mean  the  taking  from 
this  country  an  immense  quantity  of  GOLD  to  Canada,  and  receiving  therefor 
British  Government  bills.  It  is  well  known  that  thousands  of  pounds  sterling 
are  daily  offered  on  the  exchange ;  and  such  is  the  demand  at  this  moment  for 
gold  that  it  will  bring  upward  of  4  per  cent  advance  for  the  purpose  of  the  above- 
mentioned  traffic." — From  the  "  Boston  Patriot,"  in  "  Niles'  Register,"  vi,  p.  46, 
1814. 

*  3  *'  Finance,"  p.  399.  Mr.  Ingham  (Secretary  of  the  Treasury,  in  a  report 
to  the  Senate,  May  4,  1830),  in  discussing  this,  says  that,  although  Lowndes 
attributed  the  fact  to  an  error  in  the  selection  of  a  ratio  by  Hamilton,  "  it  does 
not  appear  from  the  market  price  in  the  United  States,  during  the  whole  of  that 
time  [1702-1819],  that  gold  was  more  valuable  for  exportation  than  silver.  On 
the  contrary,  it  will  be  observed,  by  reference  to  Table  B  [White's  untrust- 
worthy table],  that  in  England,  piior  to  1810,  the  ratio  of  gold  to  silver  had  for 
fifty  years  averaged  at  less  than  1  to  14'7o,  and  at  no  period  of  ten  years  as 
4 


30  THE   UNITED   STATES,    1792-1873. 

"  It  can  scarcely  be  considered  as  having  formed  a  material 
part  of  our  money  circulation  for  tlie  last  twenty-six  years. 
In  fact,  the  situation  has  been  thus  distinctly  described :  ^ 

"  Our  national  gold  coins  were  seldom  if  ever  used  as  cur- 
rency. Silver,  which,  by  the  act  of  1792,  rated  quite  as  high 
as  its  commercial  value,  was  the  only  national  coin  much  used 
by  our  citizens.  On  our  Northwestern  and  Southern  frontiers, 
and  in  some  Atlantic  cities,  foreigners  occasionally  scattered 
foreign  gold  coins.  But  these  did  not  form  any  considerable 
portion  of  the  circulating  medium,  except  perhaps  at  tlie  South- 
west. As  they  were  valued  by  weight,  their  circulation  was 
highly  inconvenient  and  often  the  subject  of  imposition.  Their 
value  was  constantly  fluctuating,  according  to  the  rates  of  ex- 
change on  Europe,  where  they  were  a  legal  tender  in  payment 
of  balances  due  from  us." 

In  fact,  the  result  of  careful  inquiry  reveals  to  us  that 
gold  coins  were  seldom  seen  during  the  largest  part  of  this 
period  from  1792  to  1834.  Even  when  bank-paper  was  used, 
the  reserves  of  the  banks  were  generally  in  silver,  not  in 
gold.^  Whatever  the  cause  of  the  change  in  the  relative 
values,  certain  it  is  that  gold  disappeared,  and  that  the  United 
States  had  but  a  single  silver  currency  as  early  as  1817,  and 
probably  earlier. 

These  conclusions  are  fortified  by  the  returns  of  gold  and 
silver  coinage  at  the  United  States  Mint.  In  tlie  exposition 
of  Gresham's  law  it  was  explained  that  the  metal  which  had 
fallen  in  value  would  be  presented  at  the  Mint  to  be  coined, 
while  the  dearer  metal  would  go  into  the  melting-pot,  or  be 
exported.  Inasmuch  as  silver  had  fallen  in  value  relatively 
to  gold,  it  was  to  be  expected  that,  to  some  extent,  even  in  a 
new  community  where  specie  was  scarce,  silver  would  be 
brought  to  the  Mint  in  preference  to  gold.  And  this  is  what 
we  find  to  be  the  fact.     After  1805  the  coinage  of  silver  dis- 

high  as  1  to  15."  He  then  admits  "the  fact  that  it  [gold]  did  not  then  [prior 
to  1819]  circulate."     Cf.  "  Report  of  1878,"  p.  576,  for  the  context. 

1  "  H.  R.  Report,"  p.  5,  No.  513,  24th  Congress,  1st  session,  March  26,  1836. 

'  C.  P.  White  says,  in  1832:  "For  the  last  fifteen  years  our  currency  has 
been  exclusively  bank-notes  (except  for  small  change),  subject  to  redemption,  on 
demand,  with  silver."—"  Report  No.  278,"  p.  24,  1833-1834. 


v^ 


CHART    II. 

Coinage  of  Gold  and  Silver  at  the   United  States  Mint,  1793- 
Silver,  r  -»     Gold^ 


Ratio,  1  :  15. 


1793-6 

1796 

1797 

1798 

1799 

1     — !■ 

r-      1^^^ 

1800 
1801 
1802 
1803 
1804 
1805 
1806 

1807 

1808 

1809 

1810 

1811 

1812 

1813 

1814 

1815 
1816 
1817 

01 

0 

1818 

1819 

1820 
1821 

1822 

1823 

1824 

1825 

1826 

1827 

1828 

1829 

1830 

1831 

1832 

1833 

' 

THE  SILVER  PERIOD.  31 

tinctlj  increased,  without  an  increase  of  gold  coinage,  while 
soon  after  the  war  of  1S12  the  coinage  of  gold  almost  entirely 
ceased,  but  the  issue  of  silver  coins  steadily  multiiDlied  during 
the  remainder  of  this  period.  This  can  be  most  easily  seen 
in  Chart  II.  The  length  of  the  dark  lines  away  from  the 
perpendicular  line  shows  the  value  of  gold  coined  (estimated 
in  dollars)  each  year,^  while  the  open  lines,  extending  in  an 
opposite  direction,  show  the  same  for  silver.^  So  distinct  a 
change  in  the  relative  amounts  of  gold  and  silver  coinage 
since  1805  is  in  itself  cumulative  proof  that  there  was  such  a 
variation  of  the  market  from  the  Mint  ratio  as  to  send  silver 
to  the  Mint  for  coinage  in  preference  to  gold  as  early  as  1806. 
And  this,  too,  although  American  dollar  pieces  ceased  to  be 
sent  out  from  the  Mint  after  1805,  and  were  not  coined  from 
that  time  to  1836.  The  mass  of  silver  coins  issued  were  in 
the  form  of  half-dollars,  which  contained  proportionally  the 
same  weight  of  silver  as  the  dollar  piece. 

In  summing  up,  we  find  that,  in  fact,  the  ratio  of  1 :  15 
was  in  accordance  with  the  market  ratio  at  the  time  of  the 
establishment  of  the  Mint  in  1792,  but  that  Hamilton  was 
attempting  to  set  up  the  new  system  on  the  slope  of  a  de- 
clining value  of  silver  relatively  to  gold  ;  and  that  this  down- 
ward movement  was  unknown  to  the  statesmen  of  that  day. 
The  divergence  of  the  market  from  the  Mint  ratio  brought 
Gresham's  law  into  operation  as  early  as  the  period  from 
1805  to  1810,  and  before  1820  it  had  virtually  driven  gold  out 
of  use  as  a  medium  of  exchange. 

'  The  exceptional  gold  coinage  in  1820  was  due  to  special  importations  of 
gold  by  the  Bank  of  the  United  States,  in  order  to  bring  about  specie  payments. 
*  See  Table  of  Annual  Coinage  at  the  United  States  Mint,  Appendix  IV. 


CHAPTER  III. 

CAUSE   OF   THE    CHANGE    IN    THE     RELATIVE    VALUES     OF    GOLD 
AND   SILVER,  1'780-1820. 

§  1.  The  problem  before  iis  in  this  chapter  is  economic 
as  well  as  historical.  Having  seen  in  the  preceding  chap- 
ter the  effects  of  a  change  in  the  relative  values  of  gold  and 
silver  upon  our  monetary  system,  it  will  now  be  necessairy  to 
find  an  explanation  of  the  causes  which  produced  this  change. 

The  position  has  been  taken  by  some  writers  that  the 
divergence  of  the  market  from  the  Mint  ratio,  in  the  period 
we  are  speaking  of,  was,  in  fact,  a  rise  in  the  value  of  gold 
relatively  to  silver,  not  a  fall  in  the  value  of  silver  relatively 
to  gold.  The  cause  of  this  increased  value  of  gold,  they 
assert,  was  due  to  the  demand  of  England  for  gold  with 
which  to  resume  specie  payments  in  accordance  with  the  act 
of  1819.  In  the  well-known  and  elaborate  reports  ^  of  Mr. 
Campbell  P.  "White  to  Congress  in  1832  we  find  the  theory 
well  developed : 

"There  were  certainly  no  indications  that  gold  was  rated 
too  low  in  our  standard  of  1  to  15  earlier  than  1821,  when  the 
English  demand  commenced.  The  fact  of  concom  itance  in 
events  is  not  relied  upon  as  a  j^roof  of  effective  agency  ;  but  a 
great  dem,and  for  gold  and  an  increased  relative  value  for 
gold  being  coeval  circumstances,  and  in  accordance  with  the 
universally  admitted  principle  that  a  new  or  sudden  increase 
of  demand  will  enhance  prices,  it  appears  to  be  a  natural  and 
rational  inference  that  the  British  demand  for  gold  was  the 
cause  of  increasing  the  value  in  respect  to  silver." 

>  "  H.  R.  Report  No.  278,"  1833-1834,  contains  them  all.  For  this  extract 
Bee  "Report,"  March  17,  1832. 


CHANGE   m  THE   VALUE   OF   SILVER. 


33 


Year. 

Gold 

price. 

1815 

109 

1816 

91 

1817 

117 

1818 

132 

1819 

112 

1820 

103 

1821 

94 

1822 

88 

1823 

89 

1824 

88 

Condj  liaguet  ^  believed  that  the  change  of  the  market 
ratio  had  at  least  been  brought  to  general  notice  bj  the 
English  demand  for  gold.  The  theory  of  Mr.  C.  P.  White 
has  been  revived  of  late  by  Mr.  S.  Dana  Horton,^  who  says : 
"  The  concurrent  circulation  of  the  metals  at  15  :  1  (with  that 
vis  inertice  which  is  one  of  the  unsettled  problems  of  money) 
did  not  succumb  to  the  influences  of  foreign  demand  until 
the  drain  began  for  the  resumption  of  gold  payment  in  Eng- 
land." He  substantiates  his  position  by  quot- 
ing^ the  following  table  of  average  prices, 
computed  by  Professor  Jevons,  to  show  that 
the  English  demand  for  gold  caused  a  shrink- 
age in  gold  prices  of  commodities.  The  effect 
of  this  English  demand  is  traced  in  Mr.  Hor- 
ton's  argument  by  giving  estimates  of  the  sup- 
ply of  gold  and  silver  then  existing,  and  then 
comparing  with  the  existing  supply  the  amount 
of  gold  collected  by  England,  in  order  to  show 
how  large  the  demand  was  in  proportion  to  the 
supply.  It  is  estimated  *  by  him  that  the  amount  of  gold 
used  as  a  medium  of  exchange  in  western  Europe  in  1810 

'  "It  was  in  the  early  part  of  the  year  1818 — when  the  subject  of  the  re- 
sumption of  cash  payments  by  the  Bank  of  England  (which  bad  been  suspended 
since  1797)  occupied  the  attention  of  the  British  public  and  prepared  the  way 
for  the  act  of  Parliament  to  that  effect,  which  was  adopted  in  1819 — that  a 
change  in  the  relative  value  of  gold  and  silver  in  the  market  of  the  trading 
world  first  became  generally  apparent  in  the  United  States." — "  Currency  and 
Banking,"  p.  222.  Bolles,  following  Raguet,  says  on  one  page :  "  Not  until 
1818,  when  the  question  arose  of  resuming  cash  payments  by  the  Bank  of  Eng- 
land, did  the  fact  clearly  appear  in  this  country  that  a  change  had  occurred  in 
the  relative  value  of  gold  and  silver"  ;  but  on  the  next  page  he  asserts  that  "of 
the  two  metals  it  was  apparent,  even  before  the  war  of  1812,  that  gold  was 
more  desirable  for  exportation  than  silver." — "  Financial  History  of  the  United 
States,"  pp.  502,  503. 

«  "Report  of  1878,"  p.  460,  note.  Cf.  also  ibid.,  pp.  701-709.  In  these 
pages  Horton  gives  a  short  statement  of  his  position  in  convenient  form.  In 
his  volume,  "  Gold  and  Silver "  (1877),  pp.  74-98,  he  developed  this  theory 
more  fully. 

3  "  Gold  and  Silver,"  p.  83. 

4  Ibid.,  pp.  81,  83,  84. 


34  THE  UNITED  STATES,    1Y92-1873. 

was  $665,000,000,  and  that  the  accumulations  of  England 
for  resumption  purposes  created  a  new  demand  for  from 
$125,000,000  to  $150,000,000  of  gold,  while  the  annual  pro- 
duction at  that  time  was  only  $7,500,000.  "  When,  however, 
the  process  of  obtaining  gold  [for  England]  from  abroad 
had  had  time  to  exert  its  full  effect  on  prices,  and  gold  was 
actually  substituted  for  paper,  the  fall  took  place,  as  de- 
picted in  the  table  of  prices,  giving  for  1821-1824:  an  aver- 
age of  90  in  the  place  of  116 — a  difference  of  level  of  nearly 
23  per  cent." 

While  every  one  must  admit  the  effect  of  a  new  demand 
upon  an  unaltered  world's  supply  of  gold  to  increase  its 
value,  it  does  not  seem  to  me  safe  to  believe  that  gold 
rose  in  value  relatively  to  silver  because  of  the  English  de- 
mand. To  begin  with,  I  must  deny  the  worth  of  any 
guesses  as  to  the  existing  supply  of  gold  at  any  time ;  they 
are  at  most  guesses,  and,  in  the  nature  of  things,  can  not  be 
more  than  the  most  vague  approximations.  No  statistics 
of  this  kind  will  do  to  build  a  theory  upon.  It  is  a  different 
thing  with  the  annual  supply,  since  it  is  comparatively  easy 
to  ascertain  the  sums  produced  by  the  mines. 

I  am  inclined  to  think,  moreover,  that  in  this  case  too 
much  is  made  of  a  demand  such  as  that  of  England  at  this 
time,  which,  in  truth,  only  shifted  a  part  of  the  existing  stock 
of  the  metals  from  one  part  of  the  commercial  world  to 
another.  England  was  only  reclaiming  that  share  of  gold 
which  the  proportion  of  her  transactions  to  the  total  transac- 
tions of  the  Western  world  warranted.  She  could  have  had 
no  more  before  the  restriction  act  in  1797,  and  she  could 
retain  no  more  permanently  in  her  circulation  in  1822. 
During  the  continuance  of  the  Restriction  Act  England  let 
her  gold  go,  and  other  countries  obtained  a  greater  amount 
than  before  in  proportion  to  their  transactions.  About 
1820-1822  the  old  relation  was  resumed — except  so  far  as 
transactions  (or  a  general  demand  for  money)  throughout 
the  commercial  world  had  increased  or  changed.  Was  the 
accumulation  of  gold  by  England  then,  in  its  essence,  a  new 


CHANGE  IN  THE  VALUE  OF  SHAVER.  35 

demand  on  the  existing  stock  of  the  world,  taking  into  ac- 
count the  total  demand  of  the  world  as  well  as  the  total  su]> 
ply  ?  If  it  was  not,  then  the  perturbations  of  prices  which 
may  have  been  caused  by  the  refluent  tide  of  gold  into  Eng- 
land would  soon  settle  themselves  in  accordance  with  the 
new  and  permanent  distribution  of  gold.  If  Mr.  Horton  had 
shown  that  transactions,  or  general  demand  for  gold  as  a 
medium  of  exchange,  had  increased  by  1820  as  compared 
with  1T97,  without  a  corresponding  change  in  the  supply  of 
gold,  or  in  economizing  expedients  or  substitutes  for  gold, 
then  he  might  have  had  ground  for  asserting  that  gold  had 
risen  in  value.     This  he  has  not  done. 

Granting,  however,  all  the  influence  which  Mr.  Horton  as- 
cribes to  the  English  demand,  it  will  be  observed  that  he  lo- 
cates Hhe  effect  oil  prices  of  the  increased  value  of  gold  in  the 
years  1821-1824.  But,  from  the  evidence  we  have  already  col- 
lected, there  is  not  a  shadow  of  a  doubt  but  that  the  change 
in  the  value  of  silver  relatively  to  gold  was  felt  in  the  United 
States  before  the  war  of  1812,  and  that,  as  Raguet  says,  gold 
had  disappeared  from  circulation  by  1818.  Therefore,  even 
without  questioning  all  that  Mr.  Horton  claims  in  regard  to  the 
effect  on  prices  of  the  English  demand  for  gold,  it  applies  to  a 
period  (1820-1830)  which  lies  outside  of  the  time  (1810-1820) 
when  the  disturbing  causes  we  are  now  discussing  were  oper- 
ating to  drive  gold  out  of  circulation  in  the  United  States. 
Inasmuch  as  the  change  in  the  ratio  between  gold  and  silver 
was  apparent  in  the  period  from  1810-1820,  the  cause  of 
the  change  must  therefore  have  been  one  which  could  have 
had  nothing  to  do  with  the  English  demand  for  gold  which 
took  effect  later,  in  1820-1830.     In  short,  some  other  cause  ^ 

1  "  Silver  and  Gold,"  p.  83. 

*  Gallatin  also  denies  the  validity  of  Horton's  theory  in  the  following  words : 
"  It  is  erroneously  that  the  exportation  of  American  gold  coins,  which  com- 
menced in  the  year  1821,  has  been  ascribed  to  that  extraordinary  demand  [in 
England  for  purposes  of  resumption].  That  exportation  has  been  continued 
uninterruptedly  after  that  cause  had  ceased  to  operate,  and,  as  will  be  seen 
hereafter,  is  due  to  the  alteration  from  that  epoch  in  the  rate  of  the  exchanges." 
—Quoted  by  C.  P.  White  in  "  Keport  No.  278,"  1833-1834,  p.  42. 


36  THE  UNITED  STATES,   1192-181S. 

than  is  assigned  by  Mr.  Horton  was  at  work  to  produce  a  diver- 
gence in  the  values  of  gold  and  silver,  which  certainly  had  a 
marked  effect  before  1816,  the  year  when  silver  was  made  a 
subsidiary  metal  in  the  English  coinage,  and  long  before 
England  began  to  collect  any  gold  whatever  for  her  resump- 
tion of  specie  payments  in  1819-1822.^  A  glance  at  Chart 
I  will  show,  even  if  we  take  the  untrustworthy  figures  of 
White,  that  the  change  in  the  relative  values  of  gold  and  sil- 
ver had  occurred  so  long  before  the  English  demand  could 
have  produced  an  effect  that  Mr.  Horton's  position  seems  to 
me  entirely  untenable. 

Mr.  Horton,  however,  goes  still  further,  and  asserts  ^  that 
there  was  a  rise  in  the  value  of  gold, "  because,"  he  says,  "  as 
far  as  I  can  ascertain,  the  change  of  ratio  was  really  a  rise  of 
gold,  not  a  fall  of  silver.  I  am  aware  of  no  evidence  that  the 
general  value  of  money  as  shown  by  averages  of  prices  was 
less  in  1820-1830  than  it  was  in  1770-1 Y80.  Whatever  scanty 
researches  on  this  subject  have  come  to  my  knowledge  indi- 
cate a  lower  range  of  prices  in  the  former  than  in  the  latter 
period."  So  far  as  the  periods  concern  us,  the  comparison 
should  be  made  between  1780-1790  and  1810-1820,  since 
the  ratio  between  gold  and  silver  had  distinctly  changed  in 
the  latter  period ;  and  the  former  period  gives  a  just  means 
of  comparison  because  it  includes  the  fairly  quiet  years  be- 
fore the  great  continental  wars  with  France.  It  will  be  our 
part,  then,  to  discover,  so  far  as  possible,  what  change  prices 
underwent  in  this  period  ;  but  before  doing  so  it  will  be  best 

^  "The  Resumption  Act  of  1819  continued  the  restriction  of  cash  payment 
to  February,  1820,  and  thereafter  ordered  the  redemption  by  the  bank  of  its 
notes,  when  demanded,  in  a  quantity  of  not  less  than  sixty  ounces  of  gold  (over 
$1,000)  in  gold  bullion,  at  a  discount  for  paper  of  about  8|  per  cent  till  Octo- 
ber, 1820;  from  that  date  till  May,  1821,  at  about  2  per  cent  discount;  and 
thereafter,  till  May,  1823,  at  par,  but  still  in  bullion;  while  after  the  latter  date 
all  notes  were  to  be  paid  in  gold  coin  on  presentation. 

"  The  bank  was,  however,  permitted  to  pay  in  bullion  at  higher  rates  in  fixed 
periods,  and  in  gold  coin  after  May  1,  1822.  A  subsequent  law  permitted  full 
redemption  after  May  1,  1822."— Horton,  "  Gold  and  Silver,"  p.  80. 

"  "  Report  of  1878,"  p.  701. 


CHANGE    IN  THE  VALUE  OF  SILVER.  37 

to  explain  briefly  the  economic  principles  on  which  relations 
of  prices  and  money  depend. 

§  2.  Value,  we  know,  is  a  ratio.  The  value  of  an  ox,  esti- 
mated in  sheep,  is  the  number  of  sheep  for  which  the  ox  will 
exchange.  If  one  ox  exchanges  for  twenty  sheep,  an  ox  is 
twenty  times  as  valuable  as  one  sheep,  or  a  sheep  is  one-twenti- 
eth as  valuable  as  an  ox.  So  with  gold  or  silver.  When  the 
number  of  grains  of  silver  in  a  dollar  is  exchanged  for  goods, 
value  of  the  silver  is  expressed  in  the  quantity  of  other  things 
for  which  it  will  exchange,  as,  for  example,  two  bushels  of  oats. 
On  the  other  hand,  the  value  of  the  oats  is  the  quantity  of  silver 
they  will  purchase.  Yalue,  it  is  thus  seen,  is  a  relation.  There 
must  always  be  some  other  thing  with  which  to  compare  the 
given  commodity.  For  instance,  in  comparing  silver  with 
gold,  the  value  of  silver  relatively  to  gold  is  the  number  of 
grains  of  gold  for  which  a  fixed  amount  of  silver  will  freely 
exchange.  If  at  any  time  more  silver  than  before  is  needed 
to  buy  the  same  quantity  of  gold,  this  means  that  either  silver 
has  fallen  in  value  relatively  to  gold,  or  that  gold  has  risen 
in  value  relatively  to  silver.  ISTow,  however,  if  gold  had  re- 
mained nearly  stable  in  its  power  of  purchasing  other  com- 
modities in  general — that  is,  bought  about  the  same  amounts 
as  before  of  various  things  other  than  silver;  and  if  more 
grains  of  silver  were  needed  than  before  to  buy  a  given  num- 
ber of  grains  of  gold — then,  of  course,  it  would  be  said  that 
silver  had  fallen  not  merely  with  regard  to  gold,  but  to  com- 
modities in  general.  But,  on  the  other  hand,  if  silver  fell  in 
its  value  relatively  to  gold,  and  all  other  commodities  like- 
wise fell  in  relation  to  gold,  then,  of  course,  it  will  be  said 
that  gold  has  risen  in  value  not  merely  with  regard  to  silver, 
but  to  commodities  in  general.  The  amount  of  money,  such 
as  gold  and  silver  given  for  an  article,  is  its  price.  If  gold 
rises  in  value,  less  of  it  is  needed  to  buy  other  goods,  there- 
fore prices  fall.  In  other  words,  if  gold  prices  fall,  the  value 
of  gold,  provided  we  leave  credit  out  of  question,  has  in- 
creased relatively  to  commodities  in  general.  "With  this 
brief  exposition  we  may  now  go  on  to  the  study  of  our  facts. 


38  THE   UNITED   STATES,   1792-1873. 

§  3.  It  is  incumbent  on  us,  "first,  to  discover  whether,  in  the 
period  from  1T80  to  1820,  gold  gained  or  lost  in  its  general 
purchasing  power  over  ordinary  goods.  That  is,  whether 
gold  prices  rose  or  fell  in  1810-1820,  as  compared  with 
1780-1790.  But  we  must  keep  in  view  that  prices  are  the 
result  of  two  factors — (1)  the  amount  of  money  taken  in  con- 
nection with  its  rapidity  of  circulation,  and  (2)  the  extent 
of  credit  and  speculation.  Every  one  knows  that  credit  is 
purchasing  power,  and  that  prices  rise  and  fall  wholly  through 
the  use  of  credit  in  seasons  of  an  expansion  or  depression  of 
confidence.  The  fall  of  prices  which  takes  place  after  a 
commercial  crisis  is  due  more  to  a  collapse  of  credit  than  to 
any  contraction  in  the  actual  quantity  of  the  money-factor. 
If,  in  studying  this  question,  we  suppose  that  the  play  of 
credit  should  be  considered  as  about  equal  in  the  two  periods 
for  comparison,  1780-1790  and  1810-1820,  then  we  may 
fairly  draw  an  inference  as  to  the  purchasing  power  of  gold 
from  tables  of  prices.  On  no  other  basis  can  the  conclusion 
as  to  the  value  of  gold  be  worth  anything.  In  fact,  for  this 
reason,  ordinary  inferences  from  tables  of  prices  are  mislead- 
ing in  the  extreme.  For  the  present  comparison  the  prices 
for  this  period  have  been  arranged  by  Prof.  Jevons'  and 
reduced  to  a  scale  of  100,  which  represents  the  prices  of 
forty  commodities  in  1782.  The  results  are  presented  here- 
with in  Chart  III,  to  which  has  been  added  the  line  repre- 
senting the  index-numbers  computed  by  the  "  London  Econo- 
mist." The  latter  are  based  on  the  figure  2,200,  which  is 
the  sum  of  the  scales  of  22  articles,  each  by  itself  having 
100  as  a  basis.  The  average  prices  of  1845-1850  are  taken 
as  the  standard  (2,200),  and  the  movement  of  the  line  shows 
the  subsequent  departure  of  prices  from  that  basis.  This 
completes  a  chart  of  the  movement  of  prices  to  the  present 
day;  although  it  is  to  be  regretted  that  the  prices  are  not 
calculated  in  the  same  way,  both  by  Mr.  Jevons  and  the 

'  First  published  in  the  "  London  Statistical  Journal "  in  June,  1865,  vol, 
xxviii,  pp.  294-320,  and  reprinted  in  "  Investigations  in  Currency  and  Finance" 
(1884),  pp.  144-149. 


CHART  III. 


Period. 

Average 
prices. 

1'782-1'792 
1810-1820 
1820-1830 

90-5 

118-9 

92-5 

RELATIVE  VALUES  OF  GOLD  AND  SILVER.  39 

"Economist,"  tlius  presenting  a  continuous  table  witliout 
tlie  break  since  1850.  In  the  figures  given  by  Prof.  Jevons 
we  have  the  following  results  condensed 
in  the  accompanying  table.  So  far  as 
these  figures  prove  anything,  when  we 
compare  the  period  in  which  our  ratio 
of  1  :  15  was  established  by  Hamilton 
with  the  period  from  1810-1820,  during 
which  gold  disappeared  from  the  United  States,  it  surely 
can  not  be  said  that  gold  prices  fell  (thus  indicating  an  in- 
creased value  of  gold).  Although  our  concern  is  not  with 
the  years  from  1820-1830,  yet  even  in  this  period  we  do 
not  find  that  prices  were  lower  when  compared  with  those 
of  1782-1792.  And  in  Mr.  Horton's  discussion  it  will  be 
observed  that  he  only  wishes  to  show  a  fall  of  prices  in 
1821-1825.  I  can  therefore  believe  that  the  English  de- 
mand had  only  a  temporary  influence  on  the  value  of  gold, 
and  that  the  purchasing  power  of  gold  depended  upon  the 
demand  of  the  commercial  countries  taken  as  a  whole,  and 
not  upon  that  of  England  alone.  I  must  also  believe  that  a 
change  in  the  relative  values  of  gold  and  silver  was  sufliciently 
made  out  as  early  as  1810,  and  that  it  had  its  efifect  in  driving 
gold  out  of  circulation  in  the  United  States  before  1820. 
Moreover,  as  we  have  not  been  able  to  find  that  the  general 
purchasing  power  of  gold  (as  expressed  in  the  figures  referred 
to  by  Mr.  Horton)  in  1810-1820  was  less  than  in  1782-1792, 
we  can  not  believe  that  gold  had  risen  in  value  (in  the  former 
period).  Therefore  it  seems  to  be  inevitable  that  there  was  a 
fall  in  the  value  of  silver,  not  merely  with  reference  to  gold, 
but  with  reference  to  commodities  in  general.  On  the  con- 
trary, we  have  seen,  by  the  tables  given  herewith  and  by  Chart 
III,  that  gold  prices  in  the  period  just  preceding  1820  were, 
if  anything,  higher  than  in  1782-1792.  That  is,  so  far  as  these 
prices  go  for  anything,  it  was  rather  to  be  said  that  gold  had 
fallen  slightly,  rather  than  risen,  in  its  purchasing  power,  or, 
in  other  words,  had  fallen  in  its  value  relatively  to  other  goods. 
It  does  not  appear  from  Mr.  Jevons's  figures,  then,  that 


40 


THE  UNITED  STATES,    1 792-1873. 


the  value  of  gold  had  risen  by  1820  as  compared  with  1782- 
1792.  Some  confirmatory  testimony  is  offered  by  Dr.  Ed- 
mund Schebek  in  the  tables  ^  of  prices  of  a  few  articles  in 
Continental  markets  : 


■WHEAT. 

OOKN. 

BARLEY. 

GRAIN. 

PERIOD. 

111 

1  5  1 

4^ 

a 

I 
i 

M 
P. 

s 

1 

a 

-<! 

"i    §> 

6 

o 

o 

Fl. 

Kr. 

Per  c. 

FI. 

Kr. 

Per  c. 

1     Kr. 

Per  c. 

Fl. 

Kr. 

Per  c. 

1751-1760. 

1 

84-74 

-  4-70 

40-85 

-  8-87 

1119-61 

-      5 

18 

48-40 

-    6 

16 

1761-1770. 

1 

89-10 

+   2-35 

36-36 

-  3-19 

1  08-63 

-      9 

18 

45-07 

-    2 

24 

1771-1780. 

2 

09-70 

+  10-89 

57-38 

+  15-42 

1  21-91 

+    12 

22 

62-99 

+  12 

35 

1781-1790. 

2 

31-12 

+  10-17 

79-12 

+  13-81 

1  :33-2u 

+      9 

26 

81-14 

+  11 

13 

1791-1800. 

2 

54-95 

+  10-31 

83-90 

+   2-67  1  [48-06 

+    11 

16 

95-63 

+  7 

99 

1801-1810. 

4 

71-61 

+  84-98 

3 

53-07 

+  91-98  3  02-81 

+  104 

53 

3 

75-82 

+  92 

11 

1811-1820. 

4 

38-17 

-  7-09 

3 

10-60 

-12-03  2  53-76 

-  16 

18 

3 

34-16 

-11 

08 

1821-1830. 

2 

87-97 

-34-28 

2 

10-83 

-32-ll|  1  62-14 

-  36-10 

2 

20.31 

-34 

07 

It  is  to  be  kept  in  mind,  however,  that  these  were  articles 
which  would  be  in  particular  demand  during  the  Napoleonic 
wars  on  the  Continent.  But  the  comparison  of  the  average 
prices  for  1781-1790  with  those  for  either  the  period  1811- 
1820  or  even  1821-1830  shows  a  marked  rise  of  prices  in  the 
later  periods.  Still  this  does  not  furnish  very  strong  proof 
that  the  value  of  gold  had  not  risen  relatively  to  grain,  be- 
cause Dr.  Schebek  has  reduced  all  the  quotations  to  silver 
prices.     Therefore,  there  is  a  probable  induction  ^  to  be  made 

'  "  Collectiv-Ausstellung  von  Beitragen  zur  Geschichte  der  Preise,"  Prague 
(1873),  p.  102. 

'^  Another  table  from  Dr.  Schebek  (p.  87)  is  given  herewith,  which  warrants 
the  same  inferences : 


Beer  (Lower- 

Barley 

Hops, 

Wood, 

PERIODS. 

Austrian  meas- 
ures), eimer. 

(Lower-Aust.), 
peck. 

cwt. 

cord. 

Fl. 

Kr. 

Fl. 

Kr. 

FI. 

Kr. 

Fl. 

Kr. 

1751-1760 

1 

80 

12 

26 

1 

64 

1761-1770 

2 

18 

35 

2 

4 

1771-1780 

2 

30 

44 

24 

1 

46 

1781-1790 

2 

29 

28 

29 

2 

10 

1791-1800 

2 

25 

31 

38 

2 

64 

1801-1810 

2 

37 

2 

45 

54 

3 

27 

1811-1820 

3 

11 

2 

98 

100 

4 

92 

1821-1830 

2 

71 

1 

71 

44 

2 

94 

RELATIVE   VALUES   OF   GOLD   AND   SILVER.  41 

from  the  table,  so  far  as  it  goes,  to  the  effect  that  since  silver 
prices  had  risen,  the  value  of  silver  had  fallen  in  its  pur- 
chasing power  in  grain  ;  for  if  more  silver  is  needed  to 
purchase  grain  than  before,  the  value  of  silver  has  fallen 
relatively  to  grain. 

§  4.  The  value  of  either  of  the  precious  metals  at  a  given 
short  period  is  a  question  of  demand  and  supply;  and  it 
can  be  seriously  influenced  by  cost  of  production  only  in  the 
course  of  long  periods,  unless  the  lessened  cost  of  obtaining 
the  supply  throws  enormous  quantities  on  the  market  at 
once,  and  thus  depresses  its  vakie  in  a  comparatively  few 
yeare.  The  effect  on  the  value,  however,  takes  place  through 
the  operation  of  supply  and  demand.  To  determine  the 
causes  affecting  the  value  of  silver,  therefore,  we  must  take 
into  account  not  only  those  influences  which  operate  as  sup- 
ply, but  also  those  which  operate  as  demand. 

When  we  discover  that  Mr.  Horton's  main  position  is 
that  the  English  demand  for  gold  had  so  important  an  influ- 
ence as  to  alter  the  relation  of  gold  to  other  commodities 
throughout  the  world,  silver  included,  we  find  him  appealing 
to  demand.  But  in  this  question  he  ignores  the  question  of 
supply.  "  How  was  this  rise  of  gold,  or,  if  it  be  preferred, 
this  increase  of  difference  between  the  metals,  brought  about  ? 
Was  it  due  to  any  alteration  in  the  relative  cost  of  produc- 
tion ?  So  far  as  I  am  informed,  histmy  has  nothing  to  say 
on  this  subject.''''  ^  It  is  just  here  that  I  am  compelled  to  dis- 
sent from  his  position.  History  has  a  great  deal  to  say  on 
the  subject ;  and  the  historical  method  will  serve  us  excel- 
lently well  in  this  investigation.  Induction  is  here  our  only 
method.  I  shall  therefore  proceed,  so  far  as  I  am  able,  to 
show  by  the  facts  what  have  been  the  influences  affecting  the 
supply  of  the  precious  metals  relatively  to  each  other. 

Inasmuch  as  the  question  here  involved  is  one  of  a  rela- 
tion between  the  values  of  gold  and  silver,  and  of  relative 
changes  in  the  production  and  supply  of  the  two  metals, 

»  "  Report  of  1878,"  p.  702. 


42 


THE  UNITED   STATES,    1792-1873. 


I  have  computed  from  Dr.  Soetbeer's  tables  ^  of  the  produc- 
tion of  the  precious  metals  the  following  figures,  intended 
to  show  the  annual  production  of  silver  relatively  to  gold 
(by  weight)  since  the  discovery  of  America  : 


Number  of  times 

Average  yearly  pro- 

Average     yearly 

the  average  yearly 

PERIOD. 

duction    of    silver    in 

production  of  gold 

production  of  silver 

kilogrammes. 

in  kilogrammes. 

was    greater    than 
that  of  gold. 

1493-1520 

47,000 

5,800 

8-1 

1621-1544 

90,200 

7,160 

12-6 

1545-1560 

311,600 

8,510 

36-6 

1561-1580 

299,500 

6,840 

43-7 

1581-1600 

418,900 

7,380 

56-8 

1601-1620 

422,900 

8,520 

49-6 

1621-1G40 

393,600 

8,300 

47-4 

1641-1660 

366,300 

8,770 

41-7 

1661-1680 

337,000 

9,260 

36-4 

1681-1700 

341,900 

10,765 

31-7 

1701-1720 

355,600 

12,820 

27-7 

1721-1740 

431,200 

19,080 

22-6 

1741-1760 

533,145 

24,610 

21-6 

1761-1780 

652,740 

20,705 

31-5 

1781-1800 

879,060 

17,790 

49-4 

1801-1810 

894,150 

17,778 

50-2 

1811-1820 

540,770 

11,445 

47-2 

1821-1830 

460,560 

14,216 

32-4 

1881-1840 

596,450 

20,289 

29-4 

1841-1850 

780,415 

54.759 

14-2 

1851-1855 

886,115 

197,515 

4-4 

1856-1860 

904,990 

206,058 

4-4 

1861-1865 

1,101,150 

185,123 

5-9 

1866-1870 

1,.S39,085 

191,900 

6-9 

1871-1875 

1,969,425 

170,675 

11-5 

1876-1880 

2,500,575 

172,325 

14-5 

To  accompany  this  table  I  have  constructed  Chart  TV, 
which  contains  two  lines — one  representing  the  value  of  sil- 
ver ^  relatively  to  gold,  the  other  the  quantity  of  silver  rela- 
tively to  gold  which  has  been  produced  annually  in  the  same 
periods. 

The  upper  line,  in  the  beginning  of  the  chart,  shows 
that,  on  the  discovery  of  America,  about  eleven  ounces  of 
silver  bought  one  ounce  of  gold  ;  while  silver  has  changed 
its  relation  to  gold  so  much  in  the  intervening  time  to  the 
present  time,  that  more  than  eighteen  (now  even  requiring 


'  See  Appendix  I. 


*  For  the  figures,  see  Appendix  II. 


CHART  IV. 


SHOWING  (1)  BY  DOTTED  LINES  THE  RATIOS  OF  GOLD  TO  SILVER,  AND  (2)  BY  SHADED  LINES  THE  NUMBER  OF  TIMES  THE  ANNUAL  PRODUCTION  OF 

SILVER  (BY  KILOGRAMS)  WAS  GREATER  THAN  THE  ANNUAL  PRODUCTION  OF  GOLD.    WHEN  THE  SHADED  LINE  MOVES 

UPWARD  FROM  THE  BASE  LINE  0,  IT  SHOWS  AN  INCREASE  IN  THE  QUANTITY  OF  SILVER  PRODUCED, 

AS  COMPARED  WITH  THE  QUANTITY  OF  GOLD  PRODUCED,      1493-1880. 

{The  outside  scale,  is  for  the  ratios.) 


^-40 


=32 


",.. 


RELATIVE  VALUES  OF  GOLD  AND   SILVER.  43 

twenty)  ounces  are  now  required  to  buy  one  ounce  of  gold. 
The. one  exception  to  this  steady  downward  tendency  was  in 
the  period  from  1710-1780,  in  which  silver  sliowed  a  ten- 
dency to  recover  its  position  relatively  to  gold  ;  that  is,  in 
this  period,  there  was  an  upward  movement  of  the  line, 
which  represented  an  increasing  vaUie  of  silver  relatively  to 
gold.  This,  however,  does  not  of  course  imply  that  gold 
remained  stationary  in  value.  For  the  increased  amount  of 
gold  produced  to  within  a  few  years  also  has  lowered  its 
value  300  or  400  per  cent  relatively  to  other  articles  since  the 
discovery  of  America.  Any  casual  reader  of  history  knows 
that  a  given  amount  of  gold  in  the  middle  ages  had  then  a 
much  greater  purchasing  power  than  it  has  now. 

The  other  Line  shows  two  considerable  variations  since 
the  discovery  of  America — one  in  the  period  1515-1680,  and 
another  in  the  period  1781-1820.  Inasmuch  as  this  line  in- 
dicates the  relative  quantities  of  the  two  metals  produced  in 
each  year,  the  line  will  rise  whenever  more  silver  than  gold 
is  produced,  or  whenever  the  gold  product  falls  off  (even  if 
the  silver  product  remains  the  same) ;  and  the  line  wiU  decline 
whenever  the  silver  product  falls  off  relatively  to  the  gold, 
or  whenever  the  gold  product  increases  (even  if  no  change 
takes  place  in  the  production  of  silver).  The  line,  therefore, 
indicates  relations,  not  quantities.  For  example,  the  chart 
shows  that  56"8  times  as  much  silver  as  gold  was  yielded  by 
the  mines  annually  in  1581-1600,  and  50-2  times  as  much 
silver  in  1801-1810.  But  still  the  annual  production  of  both 
metals  was  very  much  larger  in  this  last  period  than  in  the 
former,  although  the  number  expressing  the  relation  is  less  in 
the  second  case  than  in  the  first ;  for  in  1581-1600  the  an- 
nual production  of  silver  was  418,900  kilogrammes,  and  of 
gold  7,380  kilogrammes  ;  but  in  1801-1810  there  was  pro- 
duced annually  894,150  kilogrammes  of  silver  and  17,778 
kilogrammes  of  gold.  And  yet  the  line  did  not  rise  so  high 
in  the  last  period  as  in  the  former. 

From  the  data  before  us  it  ought  to  be  possible  now  to 
see  what  effects  have  been  produced  by  these  great  move- 


44  THE   UNITED  STATES,    1792-18Y3. 

ments  of  gold  and  silver.  The  principal  event  in  the  hi3« 
tory  of  the  precious  metals,  and  which  has  received  the 
attention  of  writers  on  economic  history  (the  very  event, 
in  fact,  which  led  to  a  discovery  of  the  economic  laws  under- 
lying money  and  gave  birth  to  political  economy),  was  the 
enormous  production  of  gold  and  silver,  beginning  about 
1545,  from  the  mines  of  Mexico,  of  Peru,  and  especially  of 
Potosi.  The  fact  that  a  disproportionate  mass  of  this  pro- 
duction was  silver — about  forty-five  times  as  much  silver  as 
gold — has  been  generally  recognized.  The  effect  on  the 
relative  value  of  gold  to  silver  was  extraordinary.  By  1660 
the  enormous  supply  of  silver  had  reduced  the  value  of  silver 
relatively  to  gold  about  36  per  cent.  It  is  not  to  be  under- 
stood, however,  that  this  fall  of  silver  indicated  an  absolute 
steadiness  in  the  value  of  gold.  The  increased  production 
of  gold,  as  already  mentioned,  has  also  lowered  its  value 
since  the  discovery  of  America  to  a  very  serious  extent. 
Chevalier  estimates  the  fall^  of  gold  as  much  as  4  to  1. 
This  fall  in  the  value  of  silver  is  capable  of  explanation. 
The  value  of  a  commodity  (cost  of  production  apart)  at 
a  given  time  depends  upon  the  relation  between  the  de- 
mand and  the  total  available  supply  then  in  existence.  If 
the  demand  remain  the  same,  and  the  supply  be  increased, 
the  value  will  fall.  Moreover,  the  extent  of  the  fall  will 
depend  largely  on  the  proportion  between  the  amount  of 
the  increased  supply  and  the  amount  already  in  existence. 
At  the  time  of  the  discovery  of  America  the  world's  stock 
of  silver  was  comparatively  small,  and  the  influx  of  vast 
quantities  from  the  American  mines  was  capable  of  making 
a  great  change  in  the  value  of  this  existing  stock.  The  ratio 
of  gold  to  silver  was  changed  from  1  :  11  to  1 :  15  by  1660 
- — a  change  so  sudden  and  so  considerable  (since  gold  itself 
had  fallen)  that  it  could  only  have  been  caused  by  the  action 
of  large  annual  supplies  on  a  small  existing  stock,  unsup- 
ported by  a  proportional  demand. 

'  Cf.  Caimes's  "  Essays  in  Political  Economy,"  p.  124. 


RELATIVE  VALUES  OF  GOLD  AND  SILVER.  45 

It  is  to  be  remarked,  also,  from  an  examination  of  Chart 
IV,  that  the  fall  in  the  value  can  become  generally  apparent 
only  after  the  annual  supply,  joining  with  the  supply  previ- 
ously existing,  has  had  the  effect  to  increase  the  total  supply, 
with  which  alone  comparisons  of  commodities  are  to  be 
made ;  so  that  only  as  the  level  of  the  total  supply  in  exist- 
ence rises  (not  the  actual  amount  of  the  annual  suj)ply  itself) 
can  the  change  in  value  show  itself.  In  other  words,  the 
change  in  relative  values  (of  durable  articles,  like  gold  and 
silver,  of  which  there  is  always  an  existing  stock)  must  always 
follow,  not  be  contemporary  with,  the  change  in  the  relative 
annual  supply.  An  illustration  of  these  principles  can  be 
seen  in  examining  Chart  IV.  The  fall  in  the  value  of  silver 
was  comparatively  slight  until  1620,  although  a  large  excess 
of  silver  over  gold  had  been  produced  since  1545 ;  and  the 
effect  of  the  silver  production  does  not  show  its  full  effect 
until  1660,  and  even  leaves  its  mark  as  late  as  1701-1710. 
The  effect  of  a  production  of  silver,  very  large  in  comparison 
with  that  of  gold,  on  the  relative  values  of  the  two  metals 
at  this  time,  therefore,  can  not  be  denied,  it  seems  to  me, 
for  a  moment.  The  influence  was  the  more  considerable 
because  of  the  disproportion  between  the  large  new  pro- 
duction of  silver  and  the  comparatively  small  supply  of  sil- 
ver then  existing. 

We  are  now  in  a  position,  at  last,  to  discuss  the  causes 
operating  to  affect  the  relative  values  of  gold  and  silver  in 
the  later  period  of  1780-1820,  during  which  it  happened  that 
Hamilton  was  founding  a  bimetallic  system  in  the  United 
States,  and  was  seeking  for  a  satisfactory  ratio.  As  has  been 
said,  a  reference  to  Chart  IV  will  show  that  the  line  indicat- 
ing the  relative  product  of  the  two  metals  has  made  only  two 
great  movements  upward  in  the  last  four  centuries.  The 
first  one  we  have  just  discussed,  and  history  has  generally 
admitted  all  the  results  as  to  the  value  of  silver  that  have 
been  here  attributed  to  it ;  but,  naturally  enough  (perhaps 
because  fit  materials  for  study  have  been  wanting  until  of 
late),  no  sufiicient  account  has  been  taken  of  the  second  great 
5 


46  THE  UNITED  STATES,   1792-1873. 

movement  in  tlie  history  of  the  precious  metals  from  1780 
to  1820.  Jacob  ^  was  too  close  to  the  events  when  he  wrote 
to  grasp  the  whole  situation.  But  of  this  period,  as  extraor- 
dinary in  its  way  as  the  period  of  1560-1660,  Horton  re- 
marks,^ "  History  has  nothing  to  say."  In  short,  the  changes 
in  the  relative  production  of  silver  and  gold  from  1781-1820 
are  on  so  enormous  a  scale  as  to  be  comparable  only  with  the 
changes  which  occurred  immediately  after  the  discovery  of 
the  American  silver  mines.  By  changes  I  mean  the  immense 
preponderance  of  the  silver  over  the  gold  product.  In  the 
earlier  period  the  mass  of  new  silver  acted  on  a  compara- 
tively small  existing  stock,  and  brought  a  fall  in  value  of  36 
per  cent.  By  1780,  however,  the  total  quantity  of  both  gold 
and  silver  in  existence  was  largely  increased  by  the  whole 
annual  production  during  the  exceptional  period  in  the  six- 
teenth and  seventeenth  centuries.  Turning  to  the  period 
from  1780-1820,  it  is  seen  that  a  very  great  excess  of  silver 
over  gold  was  produced.  But  the  situation  was  a  differ- 
ent one  from  that  when  a  similar  occurrence  took  place  in 
1560-1660.  The  existing  stock  had  been  enormously  in- 
creased by  1780,  and  the  annual  supply  of  new  silver,  there- 
fore, naturally  bore  a  less  ratio  to  the  existing  stock  than  did 
the  annual  supply  to  the  whole  stock  in  1560.  And  even  a 
greater  annual  production  of  silver  in  1780  would  have  pro- 
duced a  less  effect  on  the  value  of  silver  at  that  time  than  the 
annual  supply  in  1560  produced  on  the  value  of  silver  in  the 
sixteenth  century.  Therefore,  even  if  a  greater  amount  of 
silver  was  mined  in  1780-1820  than  in  1560-1660,  we  must 
expect  to  find  that  it  produced  a  less  change  in  the  former, 
than  actually  occurred  in  the  latter,  period.  This  is  a  matter 
capable  of  homely  illustration.     If  a  pailful  of  water  be 

'  "  An  Historical  Inquiry  into  the  Production  and  Consumption  of  the  Pre- 
cious Metals"  (1831). 

2  Mr.  Horton  has  even  quoted  the  figures  of  Soetbeer  from  1761-1830,  and 
strangely  says  they  show  no  "  change  of  relative  quantity  "  sufficient  to  cause  a 
rise  in  the  value  of  gold  due  to  consumption  by  the  arts  ("  Report  of  1878,"  p. 
102). 


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RELATIVE   VALUES   OF   GOLD  AND   SILVER.  47 

poured  into  a  tub,  the  surface-level  of  water  will  rise  on  the 
sides  of  the  tub  higher  than  it  would  have  risen  had  the  pail- 
ful been  poured  into  a  village  pond,  because  there  was  a 
greater  quantity  of  water  in  the  pond  to  be  affected  by  the 
new  water  added.  So  in  respect  of  silver.  There  was  a 
greater  quantity  of  silver  already  in  existence  by  1780  than 
in  1560  to  be  affected  by  the  new  supply. 

The  real  influence  of  the  period  from  1T80-1820  on  the 
precious  metals  can  be  appreciated  only  by  a  comparison 
with  the  well-known  period  of  1560-1660,  when  the  produc- 
tion of  silver  relatively  to  gold  was  at  its  highest  point. 
Chart  V  will  show  the  relative  quantities  of  both  gold  and 
silver  added  to  the  world's  stock  in  those  years.  The  dis- 
proportion between  the  production  of  gold  and  silver  is  visi- 
bly large,  and  it  is  not  surprising  that  it  caused  a  change  in 
the  relative  value  of  silver  to  gold  of  36  per  cent.^ 

With  this  exposition  of  the  metallic  product  in  1560- 
1660  compare  the  production  of  silver  relatively  to  gold  in 
1780-1820,  as  shown  in  Chart  YI,  constructed  on  the  same 
scale  as  Chart  V;  and,  although  the  latter  period  extends  over 
only  sixty  years  while  the  former  covers  one  hundred  years, 
it  will  be  seen  that  the  total  product  in  1780-1820  was 
much  larger  for  both  metals  than  in  1550-1660,  although  the 
relation  between  the  amounts  is  about  the  same.  In  short, 
this  later  period  is  fully  as  extraordinary  for  its  excessive 
silver  product  as  the  better-known  but  earlier  period.  As 
will  be  seen  by  reference  to  Chart  lY,  this  great  increase  of 
silver  was  chiefly  due  to  the  increasing  richness  of  the  Mexi- 

*  "  The  entire  foreign  trade  of  the  greatest  commercial  nation  then  in  exist- 
ence [in  the  sixteenth  century]  probably  did  not  much  exceed  that  which  is 
now  carried  on  in  a  single  English  or  American  port.  The  total  tonnage  of  the 
united  galleons  which  constituted  the  Spanish  mercantile  marine  only  amounted, 
a  century  later,  as  we  are  informed  by  Robertson,  to  27,500  tons,  little  more 
than  the  tonnage  of  the  Great  Eastern  steamship.  Some  of  the  most  populous 
and  wealthy  communities  of  the  present  day  had  not  yet  begun  to  exist ;  and 
the  whole  quantity  of  the  precious  metals  then  in  use  was  probably  less  than 
that  which  now  circulates  in  some  second-rate  European  kingdoms." — Cairnes's 
"Essays,"  p.  111. 


48  THE   UNITED   STATES,    1792-1873. 

can  ^  mines.  Witlioiit  doubt,  although  our  statesmen  had  no 
knowledge^  of  what  was  going  on,  it  was  this  great  outflow  of 
silver  from  Mexico  which  made  silver  so  abundant  in  our 
circulation  and  filled  the  West  Indies,  with  which  we  traded, 
with  the  cheapened  metal.  This  was  noticed  in  1819  by  Mr. 
Lowndes,^  who  says : 

"  The  West  Indies,  which  are  probably  our  most  consider- 
able bullion  markets,  estimate  gold  in  proportion  to  silver  very 
little,  if  at  all,  below  an  average  of  one  to  sixteen.  And  this 
is  done,  although  some  of  the  most  considerable  colonies  belong 
to  powers  whose  laws  assign  to  gold  a  lower  relative  value  in 
their  European  dominions.  This  estimate,  which  was  forced 
upon  many  of  the  colonies  by  the  necessity  of  giving  for  gold 
the  price  lohich  it  commanded  in  their  neighborhood,  and  par- 
ticularly in  the  countries  lohich  formed  the  great  sources  of 
their  supply^  seems  to  indicate  the  fair  proportion  between  the 
metals  in  the  West  Indies." 

If  the  preponderance  of  the  silver  over  the  gold  production 
in  1515-1660  caused  a  change  in  the  relative  values  of  the 

'  The  mines  of  Valenciana  in  1760,  of  Catorce  in  1773,  and  the  districts  of 
Zacatecas  in  1750  and  Guanaxuato  in  17(i6,  began  the  movement.  "The  vein 
of  Biscaina,  though  it  began  to  be  worked  at  the  beginning  of  the  sixteenth 
century,  did  not  become  enormously  productive  till  1762,  though  in  twelve  years 
from  that  period  the  owner  of  it  had  gained  a  profit  of  more  than  a  million 
sterling,  with  part  of  which  he  presented  to  the  King  of  Spain  two  ships  of  war, 
one  of  them  of  120  guns,  and  besides  lent  him  upward  of  200,000  pounds." 
Jacob,  "Precious  Metals,"  pp.  382,  383. 

^  Even  Tooke,  who  is  quoted  by  C.  P.  White,  had  little  knowledge  of  what 
was  going  on,  although  he  suspects  the  truth.  He  "  is  inclined  to  doubt  the 
correctness  of  the  opinion  that  the  British  demand  increased  the  relative  value 
of  gold ;  and  he  remarks:  '  These  circumstances,  collectively '  (diminution  in  the 
export  of  silver  to  Asia  and  the  emancipation  of  Spanish  America),  '  are  likely 
to  have  increased  the  supply  of  silver,  and  give  reason  to  expect  that  the  fall 
in  the  price  of  silver  arose  from  a  relative  increase  of  its  qnantity  and  consequent 
dimiiiution  of  its  value  rather  than  from  a  diminished  quantity  and  increased 
value  of  gold.''  He  admits,  however,  that  '  all  information  hitherto  accessible 
relating  to  the  proportion  of  the  supply  and  demand  of  the  precious  metals  is 
vague,  and  insufficient  to  build  any  practical  conclusions  upon ;  and  the  only 
object  of  the  arguments  brought  forward  is  to  afford  grounds  for  calling  in 
question  the  opposite  presumption,  which,  in  my  opinion,  has  been  much  too 
generally  and  hastily  admitted.'  "— "  Report  No.  278,"  1833-1834,  p.  42. 

8  Report  of  January  26,  1819.     3  "  Finance,"  p.  399. 


RELATIVE   VALUES   OF   GOLD   AND   SILVER.  49 

two  metals  of  36  per  cent,  it  is  not  merely  conceivable,  but 
most  natural,  that  a  like  preponderance  in  1780-1820  should 
have  had  a  similar  effect.  The  actual  change  in  the  later 
period,  however,  w^as  about  8  per  cent.  This  fact,  then, 
which  I  set  out  to  examine,  seems  to  me  to  be  fully  ex- 
plained by  the  history  of  the  relative  production  of  the  pre- 
cious metals.  Indeed,  in  considering  the  very  great  dispro- 
portion between  the  gold  and  silver  mined  in  1780-1820  as 
shown  by  Chart  YI,  the  wonder  is,  not  that  a  change  in  the 
value  of  silver  should  have  resulted,  but  that  the  change 
should  have  been  so  small  as  is  indicated  by  8  per  cent.  But 
this,  however,  according  to  a  well-known  principle  of  value, 
already  given,  must  be  due  to  the  fact  that  by  1780  the 
existing  stock  had  been  so  largely  increased  since  1500  that 
an  extraordinary  production  in  1780-1820  was  not  capable 
of  producing  so  great  an  effect  as  before,  because  of  the 
greater  mass  to  be  affected. 

This,  then,  is  the  explanation  of  the  downward  tendency 
of  the  value  of  silver  relatively  to  gold  in  1780-1820,  as  it 
appears  from  the  results  of  my  investigation.^  I  have  found 
what  I  must  think  is  a  very  substantial  cause  for  the  fall  of 
silver,  beginning  its  work  in  1780  and  reaching  very  marked 

'  Secretary  Ingham  ("  Report  on  the  Relative  Value  of  Gold  and  Silver," 
May  4,  1830)  makes  a  point  in  1830  that  the  comparative  demand  for  silver  had 
fallen  off,  and  that  this  had  produced  a  fall  in  the  value  of  silver:  "(1)  That 
which  has  the  most  direct  influence  upon  it  is  the  revolution  in  the  India  trade ; 
some  of  the  chief  manufactures  of  that  country  are  no  longer  consumed  in  the 
United  States,  and  England  pays  for  her  whole  consumption  of  India  fabrics  in 
fabrics  of  her  own  manufacture.  It  was  stated  by  Mr.  Iluskisson,  in  1829,  that 
in  the  commerce  with  India  the  difficulty  was  not,  as  formerly,  to  find  precious 
metals  to  remit  in  payment  of  the  balance,  but  to  find  returns  from  India  to 
Europe.  (2)  The  change  adopted  in  the  monetary  system  of  England  in  1816, 
by  which  payments  in  silver  were  limited  to  forty  shillings,  has  also  diminished 
the  comparative  demand."  See  also  "  Report  of  1878,"  pp.  562,  563.  There  is 
no  ground,  I  believe,  for  supposing  that  from  1780-1820  there  was  any  change 
in  the  absorptive  power  of  Eastern  nations  for  silver  at  all  commensurate  with 
the  change  in  the  relative  values  of  gold  and  silver.  No  such  change  in  the 
comparative  demand  mentioned  by  Secretary  Ingham  is  claimed  for  the  period 
of  1780-1820.  His  point,  therefore,  even  if  substantial,  applies  to  a  period 
later  than  we  have  in  view. 


50  THE  UNITED  STATES,   1792-1673. 

results  on  the  relations  of  tlie  two  metals  before  any  measures 
whatever  were  taken  by  England  to  resume  specie  payments. 
In  a  word,  chronology  kills  Mr.  Horton's  theory.^ 

§  5.  The  foregoing  explanation,  moreover,  is  the  only  one 
which  will  clear  up  other  difficulties,  and  for  this  reason  gives 
an  additional  presumption  of  its  truth.  The  fact  has  been 
pointed  to  that  the  annual  production  of  silver  was  falling  off 
after  1810,  and  yet  that  it  was  exactly  in  the  period  after  1810 
that  the  fall  in  the  relative  value  of  silver  to  gold  began  to 
be  very  marked.^  The  inference  from  this  is  that  it  is  ab- 
surd to  suppose  that  the  relative  values  of  the  two  metals  in 
this  period  could  have  been  affected  by  the  previous  exces- 
sive production  of  silver.  There  ought  to  be  no  difficulty 
here.  It  must  rain  in  Abyssinia  before  the  Nile  can  rise  in 
Egypt.  Or,  to  refer  to  a  former  illustration,  in  showing  that 
the  annual  supply  can  not  regulate  the  value  of  gold  or  sil- 
ver, the  surface  level  of  a  pond  is  not  fixed  by  the  pailful 
poured  in,  but  by  the  water  already  in  the  pond,  together 
with  the  new  supply — or,  in  brief,  by  the  total  existing  sup- 
ply.    So  with  the  value  of  silver.     It  was  true  the  produc- 

'  For  another  theory,  that  paper  drove  out  gold,  see  chap,  iv,  §  1. 

*  Mr.  Seyd  says,  in  examining  Dr.  Soetbeer's  tables :  "  Indeed,  the  objection 
urged  against  the  concurrent  use  of  gold  and  silver  is  based  on  a  mathematical 
theory,  which  asserts  that  as  one  metal  is  produced  at  one  time  in  greater  quan- 
tity than  the  other,  so  it  must  fall  in  relative  value  to  that  other.  The  actual 
facts  utterly  contradict  this  axiom.  ...  It  will  be  admitted  that  this  table  does 
not  in  any  way  bear  out  the  theory  that  the  greater  supply  of  the  one  metal 
over  another  causes  its  decline  in  relative  value.  ...  In  1810  the  production  of 
silver  [relatively  to  gold]  was  eleven  times  as  high  as  in  1851  and  1860,  and 
yet  no  change  [in  the  relative  values]  took  place.  .  .  .  Can  anything  be  more 
conclusive  as  to  the  utter  fallacy  of  the  supposed  '  mathematical '  principle  ? 

"  Those  in  favor  of  the  monometallic  system  have  hitherto  contented  them- 
selves with  asserting  that  the  varying  supply  must  haoe  the  effect  they  suppose, 
without  even  examining  the  actual  results.  At  a  meeting  of  the  Statistical  So- 
ciety of  the  1st  of  April,  1879,  Prof.  Jevons,  after  using  the  ordinary  platitudes, 
said :  '  The  value  of  silver,  of  course,  falls  as  the  ratio  of  weight  given  rises.' 
Like  Dr.  Soetbeer,  Mr.  Jevons  belongs  to  the  class  of  men  who  violate  the  rules 
of  supply  and  demand  by  their  one-sided  view  respecting  them." — "  Decline  of 
Prosperity,"  pp.  81,  82. 


RELATIVE  VALUES   OF   GOLD  AND   SILVER.  51 

tion  ^  fell  off  after  1810.  But  the  extraordinary  new  supply 
added  since  1780  was  only  just  beginning  to  show  its  full 
force  on  the  previously  existing  stock.  It  may  have  stopped 
raining  in  Abyssinia,  while  the  rising  tide  was  still  sweeping 
down  the  channels  of  the  Nile  many  thousand  miles  below. 
In  truth,  there  was  in  this  movement  of  the  value  of  silver 
another  illustration  of  the  fact  that  the  effect  on  the  value  of 
money  is  not  contemporary  with,  but  subsequent  to,  the 
changes  in  production.  Indeed,  the  general  principles  gov- 
erning the  value  of  the  precious  metals  find  in  these  facts, 
connected  with  our  history,  striking  illustrations. 

Having  thus  offered  as  my  explanation  of  the  cause  of 
the  divergence  in  the  relations  of  gold  and  silver  in  1780- 
1820  the  excessive  production  of  silver  in  Mexico  and  South 
America  (wliich  can  be  compared  only  with  the  period  of 
1560-1660),  without  having  found  that  tables  of  prices 
showed  any  diminution  in  the  purchasing  power  of  gold  by 
1820  as  compared  with  1782-1792,  I  must  conclude  that  the 
character  of  the  change  was  that  of  a  fall  in  the  value  of 
silver,  and  not  of  a  rise  in  that  of  gold. 

In  the  following  chapter  I  shall  proceed  to  discuss  the 
means  adopted  by  Congress  to  meet  the  inherent  difficulty  of 
balancing  a  double  standard  on  a  movable  ratio.  It  is  a 
feat  which  has  never  been  successfully  performed  since  the 
world  began ;  but  it  is  a  matter  of  serious  concern  to  find 
out  the  lessons  of  our  own  experience  in  the  matter.  It  will 
be  of  interest  to  see  whether  we  have  learned  anything  from 
the  events  which  overthrew  Hamilton's  system. 

*  After  long  years  of  peaceful  mining  the  annual  production  of  silver  began 
to  fall  off  by  1810,  owing  to  the  revolutions  and  intestinal  wars  in  Mexico,  New 
Granada,  Peru,  and  Bolivia.  The  mines  and  mints  often  changed  hands,  and,  as 
a  consequence,  the  Mexican  dollars  coined  from  1810  to  1829  were  of  various  de- 
grees  of  fineness,  owing  to  the  ignorant  haste  and  carelessness  with  which  the 
silver  was  mined  and  mixed  with  other  substances  ;  and  they  were  accordingly 
discounted  from  15  to  20  per  cent.     See  Jacob,  "  Precious  Metals,"  chap.  xxv. 


CHAPTER  IV. 

CHANGE    OF   THE   LEGAL    KATIO   BY   THE   ACT    OF    1834. 

§  1.  The  condition  of  the  currencj  of  the  United  States 
from  1820  to  1830,  arising  from  the  disappearance  of  gold, 
from  the  extensive  issue  of  paper  money  (a  large  part  of  it 
secured  only  by  small  reserves),  and  from  the  circulation  of 
foreign  coins,  was  confused  in  the  extreme.^  At  the  adoption 
of  the  Constitution  we  possessed  virtually  a  metallic  cur- 
rency of  scanty  amount.  The  first  United  States  Bank 
(1791-1811)  was  conservatively  managed,  and  did  not  issue 
its  notes  excessively,  nor  in  denominations  below  ten  dollars. 
"  Bank-notes  were  rarely  seen  south  of  the  Potomac  or  west 
of  the  mountains."  After  the  failure  to  renew  the  United 
States  Bank  charter  in  1811,  local  banks  multiplied  and  paper 
issues  expanded  without  limit.  The  suspension  of  the  banks 
in  1814,  and  the  continued  issue  of  paper,  in  denominations 
"  from  one  sixteenth  part  of  a  dollar  upward,"  certainly  did 
not  aid  in  increasing  the  quantity  of  the  precious  metals  in  the 
country.  The  establishment  of  the  second  United  States 
Bank  (1817-1837)  assisted  in  bringing  about  specie  payments 
in  the  United  States  soon  after  its  re-charter.  But  the  bank 
reserves  were  almost  entirely  of  silver.^     The  silver  coinage, 

'  For  a  short  account,  see  White's  "Report  No.  278,"  1831,  pp.  56,  5*7. 

*  The  Bank  of  the  United  States  had  arranged  to  import  some  specie  from 
London  through  Messrs.  Baring  and  Reed.  "  Under  this  contract,  gold  and  silver 
were  to  be  furnished,  if  it  were  practicable,  in  equal  amounts,  according  to  the 
American  relative  value  of  1:15.  Upward  of  $2,000,000  of  silver  have  been 
accordingly  supplied,  but  not  one  ounce  of  gold." — Lowndes,  1819,  3  "Finance," 
p.  399.     "  It  is  ascertained,  in  one  of  our  principal  commercial  cities  quite  in 


CHANGE   OF  THE  LEGIL  RATIO  BY   THE  ACT  OF   1834.     53 

however,  was  in  a  deplorable  confusion,  and  requires  some 
brief  description. 

There  were  few  United  States  coins  in  circulation.  The 
act  of  1792  decreed  that  each  dollar  should  "  be  of  the  value 
of  a  Spanish  milled  dollar  as  the  same  is  now  current."  In 
fact,  the  Spanish  milled  dollar  formed  the  most  important 
part  of  our  silver  currency,  and,  being  heavier  than  the 
American  dollar  piece,  commanded  a  premium.  The  ten- 
dency showed  itself,  consequently,  to  coin  United  States  dollar 
pieces,  and  hoard  foreign  dollars.  By  exporting  the  lighter 
American  dollars  to  the  West  Indies,  and  to  any  places  where 
they  were  received  for  their  face  value  equally  with  Spanish 
dollars,  these  latter  were  imported,  sent  to  our  Mint,  and  a 
profit  realized.  Foreign  dollars,  therefore,  bore  a  premium  ^ 
of  one  quarter  to  one  half  per  cent  over  United  States  dollars. 
The  banks,  therefore,  paid  out  United  States  dollars  when 
called  upon  for  silver  for  exportation.  This  process  kept  the 
Mint  busy,  but  without  the  effect  of  filling  the  circulation 
with  our  own  coins.  The  Mint,  therefore,  was  a  useless  ex- 
pense to  the  nation,  but  a  source  of  profit  to  the  money -brokers. 
The  coinage  of  dollar  pieces  was  consequently  suspended  in 
1805  by  the  President,^  and  none  were  coined  until  1836. 

the  vicinity  of  the  Mint,  that  the  gold  coin  in  an  office  of  discount  and  deposit 
of  the  Banlc  of  the  United  States  there  located,  in  November,  1819,  amounted 
to  $165,000,  and  the  silver  coin  to  $118,000;  that  since  that  time  the  silver 
coin  has  increased  to  $700,000,  while  the  gold  coin  has  diminished  to  the  sum 
of  $1,200,  one  hundred  only  of  which  is  American." — Report,  February  2, 1821, 
by  Whitman,  3  "  Finance,"  p.  660. 

■  C.  P.  White,  "Report  No.  2*78,"  1833-1834,  pp.  66-72.  The  foreign  dol- 
lars contained  about  373^  to  374  grains  pure  silver.  Secretary  Crawford  said : 
"  Spanish  milled  dollars  compose  the  great  mass  of  foreign  silver  coins  which 
circulate  in  the  United  States,  and  generally  command  a  premium  when  com- 
pared with  the  dollar  of  the  United  States." — Quoted  by  Talbot,  January  6, 
1819,  3  "Finance,"  p.  395. 

*  Cf.  C.  P.  White,  ibid.,  p.  85.  I  find  no  reason  whatever  to  suppose  that 
this  action  of  President  Jefferson  was  as  represented  by  Mr.  Upton  ("  Money  in 
Politics,"  p.  199).  "He  desired  that  gold  should  circulate  as  well  as  silver, 
.and,  to  prevent  tlie  exjmhion  of  gold,  he  peremptorily  ordered  the  Mint  to  discon- 
tinue the  coinage  of  the  silver  dollar."  He  did  it  to  stop  the  exchange  of  our 
dollars  for  foreign  silver  dollars. 


54  THE  UNITED  STATES,    1792-1 8*73. 

The  legal  value  of  foreign  coins  in  the  United  States, 
moreover,  was  regulated  by  an  act  of  1793,  and  by  its  terms 
these  foreign  coins  were  made  a  legal  tender.  But  these 
enactments  were  temporary,  and  ran  only  for  short  periods. 
Congress,  however,  "  ceased  to  regulate  the  value  of  one  de- 
scription of  foreign  coins  after  another  until  finally,  in  1827, 
none  were  recognized  as  legal  tenders  except  our  ancient 
money ,^  the  '  Spanish  milled  dollar.' "  K^ow,  although  the 
coinage  of  the  United  States  silver  dollar  was  discontinued 
in  1805,  a  profit  was  still  realized  by  importing  Spanish  dol- 
lars, because  two  half-dollars  served  the  same  purpose  as  a 
dollar  piece  did  before,  containing,  as  they  did,  as  much  pure 
silver  as  the  dollar  piece.  And  our  silver  continued  to  be 
coined  and  exported,^  while  foreign  silver  continued  to  flow 
in.  So  far  had  this  gone  that  of  $11,000,000  of  silver  coined 
in  the  five  years  preceding  1831,  $8,000,000  had  been  coined^ 
from  foreign  dollars ;  and,  of  the  specie  in  the  United  States 
Bank,  only  $2,000,000  out  of  $11,000,000  were  in  our  own 
coins.  These  foreign  coins,  however,  were  now  not  all  "  Span- 
ish milled  dollars."  The  Spanish  countries  of  America  had 
before  this  date  established  their  independence  of  Spain  and 
assumed  new  names,  so  that  their  coins  could  no  longer  strictly 
be  termed  "  Spanish  dollars,"  and  consequently  these  South 
American  coins,  although  in  circulation,  were  not  thereafter 
a  legal  tender.  The  effect  of  this  condition  of  affairs  was 
quite  considerable,  as  may  be  seen  by  statements  of  the  cur- 
rency. The  amount  of  the  metallic  circulation  in  1830  is 
thus  estimated :  * 

Total  coins  in  United  States $23,000,000 

Coins  issued  by  United  States.. . .     14,000,000 
Spanish  dollars  and  parts  of  dollars  ^     5,000,000 

1  C.  P.  White,  "  Report  No.  278,"  1833-1834,  p.  65. 

*  White  says  the  exportation  came  to  be  considerable  in  1811-1821.     Ibid., 
p.  85.  3  Ibid.,  p.  72. 

*  Sanford,  January  11,  1830,  "Sen.  Doc.  No.  19,"  1st  session,  21st  Congress, 
p.  11. 

'  In  1836  there  were  in  circulation,  of  denominations  below  a  dollar,  pieces 
of  6 J  cents,  of  12^  cents,  of  6c?.  sterling,  pistareens  (of  16  cents  and  18  cents), 


CHANGE  OF  THE  LEGAL   RATIO  BY  THE  ACT  OF   1834.      55 

There  had  been  coined  to  this  date  $34:,000,000  of  silver  coins 
hy  the  United  States  Mint,  of  which  only  $14,000,000  re- 
mained in  the  country.  These  Spanish  coins,  which  had  dis- 
placed the  American  silver,  moreover,  became  much  worn 
and  reduced  in  weight,  and,  being  in  practice  current  with 
other  coins,  without  regard  to  weight,  naturally  acted  to 
drive  out  our  own  coins.^  A  memorial  ^  of  the  l^ew  York 
bankers,  led  by  Mr.  Gallatin,  in  1834,  represented 

"  that  the  dollar  of  Spain  and  the  gold  and  silver  coins  of 
the  United  States  constitute,  at  present,  the  only  legal  currency 
of  the  country  ;  and  that,  from  the  commercial  value  of  the 
Spanish  dollar,  and  the  intrinsic  value  of  the  gold  coins  of  the 
United  States,  they  have  become  mere  articles  of  merchandise, 
and  are  no  longer  to  be  considered  as  forming  any  portion  of 
the  metallic  currency." 

The  only  legal  medium  being  United  States  silver  coins, 
"  of  which  there  is  not  a  sufficient  quantity  to  answer  the 
ordinary  purposes  of  business,"  commerce  was  obliged  to 
use  foreign  coins  which  were  then  no  longer  a  legal  tender. 
Since  United  States  silver  dollars  were  no  longer  coined,  and 
since  it  was  more  profitable  to  send  the  Spanish  dollars  to  the 
Mint,  not  enough  dollar  pieces  remained  in  circulation.  They 
asked,  therefore,  that  the  silver  "dollar  of  Mexico,  Colombia, 
Chili,  and  Peru,  which  are  equal  in  weight  and  fineness  to 
the  Spanish  dollar,  be  likewise  made  a  legal  tender,  if  weigh- 
ing not  less  than  415  grains."  It  is  clear  that,  however 
much  some  remedy  might  be  needed,  this  step  would  only 
increase  the  difficulties.  The  bill  would  increase  the  means 
of  drivinor  out  United  States  silver  coins.  It  was  enacted 
into  law^  January  25,  1834,  although  Mr.  Sanford  had  very 

English  shillings,  Spanish  quarters,  half-crovras,  two-and-sixpence  sterling,  five- 
franc  pieces,  etc. 

'  Mr.  Jones  (Ga.)  said,  in  1834:  "Spanish  and  South  American  dollars  fur- 
nish all  our  present  circulation."—"  Cong.  Debates,"  vol.  x,  Part  lY,  1833-1834, 
p.  4657. 

«  "  Report  of  1878,"'  pp.  679-683. 

'  January  21,  1834,  a  law  was  also  passed  fixing  the  value  of  certain  gold 
coins  of  Great  Britain,  Portugal,  and  Brazil  at  94-8  cents  per  dwt. ;  those  of 


56  THE  UNITED   STATES,   1792-1873. 

properly  shown  ^  that  no  foreign  coins  should  be  made  a 
legal  tender.  The  enactment,  however,  had  no  bad  influ- 
ence, because  the  coinage  act  of  1834  soon  made  it  ineffective. 
The  confused  state  of  the  silver  coinage  as  thus  described, 
the  absence  of  gold,  and  the  existence  of  a  paper  currency, 
therefore,  complicated  the  situation.  It  was  thought  by  some 
that  the  disappearance  of  gold  was  due  to  the  existence  of 
paper  money.  "  Paper  ^  was  the  antagonist  of  gold,  and,  onr 
gold  being  at  present  undervalued,  the  paper  had  driven  it 
out  of  circulation."  And  naturally,  during  the  war  on  the 
bank,  the  scarcity  of  specie  was  attributed  to  the  action  of 
this  institution.  Secretary  Ingham,^  in  1830,  ren&oumg  post 
hoc  ergo  hoc,  observed  that,  "prior  to  the  year  1821,  gold  and 
silver  generally  bore  the  same  relation  in  the  market  of  the 
United  States  which  they  did  in  the  Mint  regulation.  .  .  . 
But,  at  no  time  since  the  general  introduction  of  bank  paper, 
has  gold  been  found  in  general  circulation."  "While  wrong, 
of  course,  as  to  the  ratio,  he  had  yet  observed  the  disappear- 
ance of  gold  about  the  time  of  the  extension  of  bank  issues. 
This  was  probably  true ;  ^  but  that  the  paper  was  the  cause  of 
the  disappearance  of  gold  is  another  question.  In  driving 
specie  out  of  circulation,  paper  has  no  special  hostility  to  the 
one  metal,  gold,  and  none  whatever  to  the  other  metal,  silver. 
Large  denominations  of  paj)er  would,  of  course,  act  to  super- 
sede the  more  valuable  metal  used  in  large  transactions  ;  but 
paper  issues  would  have  driven  out  silver  equally  well  with 
gold.  As  a  matter  of  fact,  however,  the  paper  had  not  driven 
out  silver ;  indeed,  the  metallic  circulation  and  the  reserves  be- 

France  at  93'1  cents  per  dwt. ;  and  those  of  Spain,  Mexico,  and  Colombia  at 
89'9  cents  per  dwt, 

'  "Senate  Doc.  No.  19,"  1st  session,  21st  Congress,  January  11,  1830. 

«  Mr.  Gillet,  "  Cong.  Debates,"  ibid.,  p.  4659. 

3  "  Report  of  1878,"  p.  675. 

*  "  We  may  experiment  on  our  gold  coins  without  fear  .  .  .  ;  though  a 
legal  tender,  they  have  never  been  a  measure  of  value  "  (White,  "  Report  No. 
278,"  1833, 1834,  p.  87).  "  Our  gold  coins  are  withdrawn  from  circulation  soon 
after  they  are  issued  from  the  Mint  "  (Sanford,  1830,  "  Senate  Doc.  No.  19,"  p. 
19.) 


CHANGE   OF   TEE   LEGAL   RATIO   BY   THE   ACT   OF   1834.      57 

liind  tlie  paper  were  in  silver.  For  this  use,  gold,  if  in  cir- 
culation, would  have  been  equally  employed.  That  is,  what- 
ever effect  the  paper  had  to  supersede  sjDecie,  it  would  have 
acted  equally  against  silver  or  gold ;  and  if  only  one  metal 
had  disappeared  and  the  other  had  remained,  this  must  un- 
questionably have  been  due  to  a  force  of  a  different  nature 
than  that  supposed,  and  one  which  had  the  effect  of  leaving 
only  one  metal  and  driving  out  another.  This  may  be  made 
more  clear  by  anticipating  our  story  somewhat.  After  1834, 
as  we  shall  soon  see,  gold  came  into  circulation.  Why  did 
not  the  paper  drive  out  the  gold  after  1834,  as  it  was  thought 
to  do  before  1834?  It  certainly  did  not  do  it.  We  can  not, 
therefore,  believe  that  the  paper,  however  much  it  may  have 
helped  in  the  process,  was  the  cause  of  the  disappearance  of 
gold.    What  the  cause  was  has  been  already  fully  explained.^ 

§  2,  Having  seen  the  condition  of  our  currency  after  Ham- 
ilton's system  had  been  tried  twenty-five  years,  we  must  ad- 
mit that  this  condition  was  much  worse  in  1820  than  it  was 
in  1800,  It  w^as  not  a  cheerful  prospect.  But  we  now  turn 
from  this  pictui-e  to  see  how  the  country  proposed  to  deal 
with  these  difficulties,  to  see  whether  the  true  causes  were 
understood,  and  whether  experience  had  taught  its  lessons. 

As  early  as  1818  the  United  States  began  to  recognize 
that  Hamilton's  ratio  of  1 :  15  differed  so  much  from  the 
market  ratio  between  gold  and  silver,  that  if  it  were  still  de- 
signed to  maintain  a  double  standard,  a  new  adjustment  of 
the  legal  relations  of  the  two  metals  was  necessary.  While 
nominally  possessing  a  double  standard,  the  country  really 
had  only  one,  and  that  a  silver  standard.  Owing  to  causes 
beyond  the  control  of  a  legislature,  and  which  could  not  have 
been  foreseen,  the  value  of  silver  was  so  affected  in  its  rela- 
tion to  gold  as  to  destroy  the  working  of  a  bimetallic  system. 
Here  is  to  be  found  the  inherent  difficulty  of  such  a  scheme. 
Had  Agassiz,  when  measuring  the  movement  of  the  glaciers 
in  the  Alps,  attempted  to  build  an  observatory  resting  partly 

^  Chapter  iii,  §  4. 


58  THE  UNITED  STATES,    1792-1873. 

on  the  bank  of  solid  rock  and  partly  on  the  surface  of  the 
slowly-moving  stream  of  ice,  his  house  might  have  hung  to- 
gether only  on  condition  that  the  bank  had  sympathetically 
begun  to  move  with  the  ice,  but  in  no  other  way.  Our  Con- 
gress, however,  did  not  yet  reahze  the  whole  situation.  Either 
they  must  give  the  double  standard  another  trial  at  a  new 
ratio  corresponding  with  the  change  in  the  market  ratio,  or 
choose  one  of  the  two  metals  as  a  single  standard.  If  they 
did  the  former,  what  assurances  were  there  that,  even  if  the 
legal  ratio  then  were  the  same  as  the  market  ratio,  the  coun- 
try should  escape  from  future  changes  and  not  again  see  the 
same  results  as  ensued  from  Hamilton's  ausj)icious  experi- 
ment ?  There  are  evidences  ^  that  this  was  distinctly  seen 
by  several  writers.  But  there  were  other  ideas  as  to  the 
remedies. 

The  first  proposition  in  Congress  appeared  in  a  resolution, 
worthy  of  Charles  Y  of  Spain,  to  inquire  into  the  expediency 
of  prohibiting  the  exportation  of  gold  from  the  United  States. 
The  "  exportation  of  specie  of  every  description  was  rigidly 
prohibited  by  law"  during  the  embargo  in  1807-1808,  and  in 
1812.  But,  as  Talbot 2  reported,  "the  Bank  of  the  United 
States,  and  some  of  the  State  banks,  made  considerable  efforts 
to  import  specie.  The  exportation  of  it  during  the  same  pe- 
riod has,  it  is  believed,  been  equal,  if  not  greater,  than  the 
importation  by  the  banks  and  by  individuals." 

A  committee,  of  which  Mr.  Lowndes  was  chairman,  re- 
ported,^ in  1819,  in  favor  of  a  new  legaP  ratio  of  1 :  15*6, 

'  "  The  very  fact  that  gold  and  silver  have  departed  from  the  proportions  es- 
tablished by  our  laws  is  ample  proof  that  no  such  laws  should  ever  have  been 
enacted  ;  and  the  certainty  of  a  future  change  is  equally  conclusive  against  any 
further  legislation  on  the  subject.  Even  since  the  date  of  the  report  of  the 
committee  above  referred  to  a  more  wide  separation  between  the  two  metals 
has  taken  place ;  and  had  a  law  been  enacted  a  year  ago,  agreeably  to  their 
suggestion,  it  might  possibly  have  required  an  additional  one  in  the  present  year 
to  give  it  effect. — Condy  Raguet,  "  Currency  and  Banking,"  p.  208,  written 
January  26,  1822. 

*  "  Senate  Doc.  No.  549,"  2d  session,  15th  Congress,  3  "Finance,"  p.  394. 
3  3  "  Finance,"  p.  399. 

*  The  silver  dollar  was  to  be  reduced  to  356'4  grains  pure  silver  and  39936 


CHANGE  OF  THE   LEGAL  RATIO  BY   THE  ACT   OF   1834.      59 

to  correspond  witli  the  market  ratio.  The  error  was  per- 
petuated of  a  subsidiary  coinage  containing  projoortional 
quantities  of  silver  to  the  dollar  piece  ;  but  it  was  suggested 
that  coins  less  than  half-dollars  be  limited  in  their  legal- 
tender  power  to  five  dollars. 

The  most  considerable  contributions  to  the  discussions  on 
the  coinage  in  the  early  part  of  this  century  were  made  in 
the  three  reports  of  Mr.  Campbell  P.  "White,  of  New  York.^ 
In  his  first  report  of  1831  he  expounds  the  following  doc- 
trine :  ^ 

"  That  there  are  inherent  and  incurable  defects  in  the  sys- 
tem which  regulates  the  standard  of  value  in  both  gold  and 
silver  ;  its  instability  as  a  measure  of  contracts,  and  mutability 
as  the  practical  currency  of  a  particular  nation,  are  serious  im- 
perfections ;  while  the  impossibility  of  maintaining  both  metals 
in  concurrent,  simultaneous,  or  promiscuous  circulation  appears 
to  be  clearly  ascertained. 

"  That  the  standard  being  fixed  in  one  metal  is  the  nearest 
approach  to  invariableness,  and  precludes  the  necessity  of 
further  legislative  interference." 

In  the  report  of  1832  he  adds: 

"  If  both  metals  are  preferred,  the  like  relative  proportion 
of  the  aggregate  amount  of  metallic  currency  will  be  possessed, 
subject  to  frequent  changes  from  gold  to  silver,  and  vice  versa, 
according  to  the  variations  in  the  relative  value  of  these  metals. 
The  committee  think  that  the  desideratum  in  the  monetary  sys- 
tem, is  the  standard  of  uniform  value  y  they  can  not  ascertain  that 
both  metals  have  ever  circulated  simultaneously,  concurrently, 
and  indiscriminately  in  any  country  where  there  are  banks  or 
money-dealers  ;  and  they  entertain  the  conviction  that  the 
nearest  approach  to  an  invariable  standard  is  its  establishment 
in  one  metal,  which  metal  shall  compose  exclusively  the  cur- 
rency for  large  payments." 

The  committee,  therefore,  recommended  a  single  standard 

grains  standard,  and  the  gold  eagle  was  to  contain  23Y"98  grains  pure  gold  and 
259'61  grains  standard  weight.  A  seigniorage  of  14'85  grains  of  silver  was  to  be 
exacted  on  each  dollar  coined,  which  would  have  made  the  ratio  less  than  15 :  1. 

»  "  U.  R.  No.  278,"  23d  Congress,  1st  session,  entitled  "  Gold  and  Silver  Coins," 
contains  all  three. 

»  "Report  No.  278,"  1833-1834,  p.  61. 


60 


THE   UNITED   STATES,    1792-1873. 


of  silver^  alone.  In  short,  our  experience  since  1Y92  had 
made  a  deep  impression  on  the  minds  of  the  intelligent  men 
of  that  time.  Both  Mr.  C.  P.  White  and  Secretary  Ingham  ^ 
began  to  see  that,  in  the  nature  of  things,  a  double  standard, 
without  constant  changes  of  the  legal  ratio,  could  not  exist 
for  any  length  of  time.  Mr.  Ingham  saw  no  safety  in  bimet- 
allism, because,  in  his  opinion,  it  was  impossible  to  keep  the 
mint  and  the  market  ratios  alike.  In  the  best  discussion  of 
the  subject  there  was  a  disposition  shown  to  select  a  single 
standard,  and  that  of  silver.  And,  with  this  general  review 
of  the  plans  proposed,  we  may  now  go  on  to  recount  the 
choice  of  means  actually  adopted  in  1834. 

§  3.  "When  the  matter  finally  came  before  Congress,  the 
bill  first  proposed  by  Mr.  White's  committee  in  the  House 
contained  a  scheme  for  a  double  standard  at  a  ratio  of  1 :  15'6. 
But  in  the  selection  of  a  ratio  there  were  various  opinions  at 
that  time,  thus  tabulated,^  as  to  the  weight  of  the  gold  coins 
(leaving  the  silver  dollar  unchanged)  : 


Fine. 

Alloy. 

Standard. 

Propor- 
tion of 
aUoy. 

Gold  to 
silver. 

Advanoe 
per  cent. 

Mint 

238^ 

2371 

237^0- 

237A 

234 

233ff 

23 1 
21^ 

21/lT 

26-1% 

26 

21H 

260 

2591 

259t% 

264 

260 

254ff 

i 

1  :  15-777 
1  :  15-607 
1  :  15-625 
1  :  15-625 
1  :  15-865 
1  :  15-900 

4^ 

5t^o^ 

6 

Mr.  Gallatin" 

Mr.  Inp;ham  (report) 
Committee  (White). 
Mint    

Mr.  Sanf ord 

'  "  Silver  is  the  ancient  currency  of  the  United  States,  the  metal  in  which 
the  money  imit  is  exhibited,  the  money  generally  used  in  foreign  commerce,  and 
that  description  of  the  precious  metals  in  the  distribution  of  which  we  exercise 
an  extensive  agency.  The  committee,  upon  due  consideration  of  all  attendant 
circumstances,  are  of  opinion  that  the  standard  of  value  ought  to  be  legally  and 
exclusively,  as  it  is  practically,  regulated  in  silver." — "Report  of  1878," p.  675, 
and  "  Report  No.  278,"  p.  8. 

^  "  Report  of  1878,"  p.  568.  "  The  fluctuations  in  the  value  of  gold  and  silver 
can  not  be  controlled  ;  and  even  the  attempt  to  conform  the  Mint  to  the  market 
values  must  produce  a  change  in  the  latter." 

3  By  Mr.  Moore,  Director  of  the  Mint.  See  "Report  No.  278,"  1833-1834, 
p.  79. 

4  See  "  Report  of  1878,"  p.  682. 


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■■— '                                                                                                               T-l 

CHANGE   OF  THE   LEGAL   RATIO   BY  THE  ACT  OF   1834.      61 

Speaking  of  the  failure  of  the"  two  metals  to  circulate 
concurrently,  and  of  the  inaction  on  that  subject  since  the 
death  of  Mr.  Lowndes  in  1822,  Condy  Eaguet  ^  gives  a  reason 
for  the  presentation  of  this  bill  in  1834 : 

"We  should  possibly  have  for  many  years  remained  iu  that 
situation,  had  it  not  been  for  a  fresh  occurrence  by  which  fan- 
cied i^rivate  interest  was  brought  to  bear  upon  Congress.  That 
occurrence  was  the  discovery  of  gold  in  North  Carolina  and 
other  Southern  States.  .  .  .  This  gradually  increasing  produc- 
tion of  gold  at  the  South  engendered  precisely  the  same  spirit 
as  the  increased  production  of  iron  had  done  at  the  North. 
The  owners  of  the  gold-mines  cried  out  for  legislative  protec- 
tion, as  the  owners  of  tbe  iron-mines  had  previously  done,  and 
laws  were  solicited  to  enable  the  former  to  get  more  for  their 
gold,  or  rather  for  the  rent  of  their  land,  than  they  could  other- 
wise have  obtained."  * 

Political  projects  also  entered,  as  we  shall  soon  see,  into 
the  passage  of  this  bill  and  the  selection  of  a  ratio.  How  they 
worked  may  be  seen  first  by  a  reference  to  the  actual  ratios  of 
gold  to  silver  in  these  years.  The  quotations  of  silver  since 
1833  have  been  authoritatively  given  in  the  London  tables  of 
Pixley  and  Abell,  and  since  that  date  are  not  disputed.  We 
have  consequently  an  exact  knowledge  of  the  market  ra- 
tios of  gold  to  silver  at  this  time  when  a  new  adjustment 
was  being  made.  Chart  YII  has  been  constructed  on  the 
basis  of  these  tables,  and  shows  that  the  average  ratio  from 
1825  to  1835  was  a  little  more  than  1  :  15*7.  The  only  ac- 
tion which  could  be  justified  by  monetary  experience,  or  by 
the  hope  of  maintaining  a  double  standard,  demanded  that 
the  United  States  in  1831  should  adopt  the  market  as  the 
legal  ratio.  Did  the  statesmen  in  charge  of  the  bill  have  a 
definite  knowledge  of  the  market  ratio,  even  if  they  intended 

>  "  Currency  and  Banking,"  pp.  224,  225,  226. 

^  C.  P.  White  felt  the  force  of  this  reason  in  1832  ("Report  No.  2*78,"  p.  56) : 
"  It  may  be  fairly  concluded  that  the  amount  of  silver  annually  furnished  is  not 
upon  the  increase,  while,  on  the  other  hand,  we  have  positive  evidence  of  a 
rapid  increase  (as  yet,  to  be  sure,  not  comparatively  on  a  great  scale)  in  our 
own  country,  in  the  production  of  gold  from  mines  represented  to  be  of  great 
territorial  extent,  and  of  encouraging  and  fruitful  appearance." 
6 


Q2  THE   UNITED   STATES,   1792-1873. 

to  follow  it  ?  There  seems  to  be  no  doubt  of  it.  Three  of 
the  plans  given  at  the  beginning  of  this  section  were  based 
on  a  ratio  of  1 :  15'6,  which  was  generally  supposed  to  be 
the  market  ratio  in  the  United  States  (and  it  was  very  near 
the  true  ratio).  The  bill  of  the  committee  embodying  a 
double  standard  based  on  the  ratio  of  1 :  15*6  was  introduced 
into  the  House,  and  had  passed  through  the  Committee  of 
the  Whole,^  when  it  encountered  the  political  breezes  and 
was  driven  out  of  its  course.  Mr.  C.  P.  White  changed 
front,  and,  although  in  his  previous  elaborate  reports  he  had 
strongly  urged  ^  the  ratio  of  1 :  15*6,  he  himself  proposed  an 
amendment  altering  the  ratio  in  the  bill  to  1 :  16,  which  was 
adopted  and  finally  enacted.  The  bill  proposed  by  Mr. 
White's  committee  became  significantly  known  as  the  "  Gold 
Bill."  This  move,  which  was  of  course  at  variance  with 
any  attempt  to  retain  a  double  standard,  had  probably  both 
a  political  and  a  monetary  object.  It  will  be  remembered 
that  Mr.  White,  in  his  reports,  opposed  a  double  standard 
and  favored  a  single  standard  of  silver.  In  my  judgment, 
he  was  easily  led  by  his  preference  for  a  single  standard 
to  join  in  establishing  a  ratio  between  gold  and  silver  which 
must,  in  the  nature  of  things,  soon  bring  about  a  single 
standard,  if  not  of  silver,  at  least  of  gold ;  while,  on  the 
other  hand,  there  was  a  strong  political  party  waging  war 
against  the  United  States  Bank,  and  desirous,  as  part  of  their 
warfare,  to  make  a  battle-cry  of  a  gold  currency,  in  distinction 
to  the  paper  issues  of  the  bank.  Under  the  leadership  of 
Benton,  the  anti-bank  party  made  support  of  the  "Gold 
Bill "  and  the  ratio  of  1 :  16  a  partisan  shibboleth. 

Benton '  said  that  1  :  15f  "  was  the  ratio  of  nearly  all  who 

>  "  Cong.  Debates,"  vol.  x,  Part  lY,  1833-1834,  p.  4663. 

'  "  The  committee  are  finally  of  opinion  that  the  rate  proposed  by  the  Sec- 
retary of  the  Treasury,  of  1  of  gold  for  15"625  of  silver,  is  the  utmost  limit  to 
which  the  value  can  be  raised,  with  a  due  regard  to  the  paramount  interest ;  the 
preservation  of  our  silver  as  the  basis  of  circulation." — "  Report  No.  278,"  p.  56. 

-^  ".It  is  true  that  all  who  approved  the  gold  bill  were  not  friends  of  General 
Jackson,  and  that  all  who  opposed  it  were  not  his  foes,  but  as  the  vote  in  Con- 


CHANGE  OF  THE  LEGAL  RATIO  BY   THE  ACT  OF   1834.      63 

seemed  best  calculated,  from  their  pursuits,  to  understand  the 
subject.  The  thick  array  of  speakers  was  on  that  side  ;  and 
the  eighteen  banks  of  the  city  of  New  York,  with  Mr.  Gallatin 
at  their  head,  favored  that  proportion.  The  difficulty  of  ad- 
justing this  value,  so  that  neither  metal  should  expel  the  other, 
had  been  the  stumbling-block  for  a  great  many  years ;  and 
now  this  difficulty  seemed  to  be  as  formidable  as  ever." 

It  was  urged  that  Spain,  Portugal,  Mexico,  South  Amer- 
ica, and  the  West  Indies  (except  Cuba,  which  had  lY :  1) 
rated  silver  to  gold  at  16 : 1 ;  but  it  is  quite  likely  that  the 
ratio  of  16 : 1  was  favored  as  much  because  it  gave  a  slight 
advantage  to  gold  as  that  other  countries  had  such  a  ratio. 
In  the  debates  in  the  House,  Mr.  Cambreleng,  of  New 
York,  openly  admitted  ^  the  object  of  the  change :  "•  By 
adopting  a  higher  ratio  we  shall  be  more  certain  of  accom- 
plishing our  object,  which  is  to  secure  for  our  own  country 
the  permanent  circulation  of  gold  coins."  And  the  political 
considerations  triumphed.^    Mr.  Selden,  of  New  York,  moved 

gress  was  made,  in  a  great  degree,  a  party  vote,  the  party  which  so  turned  it  to 
account  are  using  every  effort  to  reap  the  fruits  of  their  policy." — Raguet, "  Cur- 
rency  and  Banking,"  p.  218. 

'  "Cong.  Debates,"  1833-1834,  vol.  x.  Part  IV,  p.  46'7l.  Mr.  Jones,  of 
Georgia  (where  gold  had  been  discovered),  held :  "  If  the  gentleman  is  correct  in 
saying  our  gold  coins  will  return  to  us  again  after  they  have  once  left  us,  I  can 
only  say  this  is  a  consummation  most  devoutly  to  be  wished.  ...  If  this  ratio 
(1  :  16)  will  have  the  additional  effect  to  bring  them  [gold  coins]  back  again,  it 
must  be  considered  an  additional  recommendation  to  the  substitute." — Ibid.,  p. 
4654. 

'  "  Mr.  White  gave  up  the  bill  which  he  had  first  introduced,  and  adopted 
the  Spanish  ratio.  Mr.  Clowney,  of  South  Carolina,  Mr.  Gillet  and  Mr.  Cambre- 
leng, of  New  York,  Mr.  Ewing,  of  Indiana,  Mr.  McKim,  of  Maryland,  and  other 
speakers  gave  it  a  warm  support.  Mr.  John  Quincy  Adams  would  vote  for  it, 
ihoncfh  he  thought  the  gold  was  overvalued  ;  but  if  found  to  be  so,  the  difference 
could  be  corrected  hereafter.  The  principal  speakers  against  it  and  in  favor  of 
a  lower  rate,  were  Messrs.  Gorham,  of  Massachusetts ;  Selden,  of  New  York  ; 
Binney,  of  Pennsylvania ;  and  Wilde,  of  Georgia.  And  eventually  the  bill  was 
passed  by  a  large  majority — 145  to  36.  In  the  Senate  it  had  an  easy  passage 
[35  to  7].  Messrs.  Calhoun  and  Webster  supported  it ;  Mr.  Clay  opposed  it, 
and  on  the  final  vote  there  were  but  seven  negatives :  Messrs.  Chambers,  of 
Maryland;  Clay;  Knight,  of  Rhode  Island;  Alexander  Porter,  of  Louisiana; 
Silsbee,  of  Massachusetts ;  Southard,  of  New  Jersey ;  Sprague,  of  Maine." — 
"Report  of  1878,"  p.  696,  chap,  cviii,  1834— "Thirty  Years' View";  and  see 


Q4:  THE  UNITED  STATES,    1792-1873. 

as  an  amendment  the  adoption  of  a  ratio  of  1 :  15f ,  but  it 
was  lost  by  a  vote  of  52  to  127 ;  and  Mr.  Gorham's  amend- 
ment of  a  ratio  of  1 :  15"825  was  rejected,  G9  to  112.^  In 
short,  the  majority  were  evidently  aiming  at  a  single  gold 
standard,^  through  the  disguise  of  a  ratio  which  overvalued 
gold  in  the  legal  proportions.  In  the  market  an  ounce  of 
gold  bought  15'7  ounces  of  silver  bullion ;  when  coined  at 
the  Mint  it  exchanged  for  sixteen  ounces  of  silver  coin.  Sil- 
ver, therefore,  could  not  long  stay  in  circulation. 

§  4.  The  Coinage  Act  of  1834,^  therefore,  in  contradistinc- 
tion to  the  policy  of  Hamilton  in  1792,  did  not  show  the  result 
of  any  attempt  to  select  a  mint  ratio  in  accord  with  that  of  the 
market.  It  was  very  clearly  pointed  out  in  the  debates  that 
the  ratio  of  1 :  16  would  drive  out  silver. 

Mr.  Gorham,*  of  Massachusetts,  "  warned  the  House  not  to 
bring  about,  by  its  hasty  legislation,  the  same  state  of  things 

"Cong.  Debates,"  p.  2122,  vol.  x,  Part  II,  1833-1834.  The  bill  seems  to  have 
been  little  discussed  in  the  Senate. 

*  "  Cong.  Globe,"  vol.  i,  p.  467.  John  Quincy  Adams  voted  for  the  bill 
"  reluctantly  and  in  the  hope  that  the  ratio  would  be  amended  elsewhere.  He 
considered  it  entirely  too  high." — "Cong.  Debates,"  vol.  x,  Part  IV,  p.  4673. 

*  The  Washington  '"  Globe  "  said  with  some  party  rancor :  "  Contrary  to  their 
will,  the  bank  party,  even  in  the  Senate,  have  been  obliged  to  vote  for  the  meas- 
ures of  the  Administration,  deemed  essential  to  carry  out  its  policy.  By  public 
opinion  they  have  been  forced  to  vote  for  the  Gold  Bill,  which  is  a  measure  of 
deadly  hostility  to  the  interests  of  the  bank,  will  supersede  its  notes,  and  is  the 
harbinger  of  a  real  sound  currency.  The  people  are  now  enabled  to  under- 
stand the  policy  of  the  Administration,  and  to  see  that  it  would  give  them  gold 
instead  of  paper.  The  great  bank  attorney,  Mr.  Clay,  was  bold  enough  to  vote 
against  this  bill ;  but  he  could  carry  only  six  of  the  bank  Senators  with  him. 
The  mass  of  them,  although  they  voted  for  the  bill  with  the  utmost  reluctance, 
dared  not  to  tell  the  people,  '  We  ivill  deny  you  gold,  mid  force  you  to  depend  for 
a  general  currency  on  the  notes  of  the  mammoth  bank.''  Thus  were  they  forced 
to  minister  to  the  triumph  of  the  Administration." — Quoted  in  "  Niles's  Regis- 
ter," vol.  X,  fourth  series. 

^  See  Appendix  III  for  the  text  of  the  act. 

«  "  Cong.  Debates,"  1833-1834,  vol.  x.  Part  IV,  pp.  46,  51,  52 :  "  It  was  admit- 
ted there  must  be  a  concurrent  circulation  of  silver  and  gold.  The  difficulty  of 
fixing  the  ratio  of  their  relative  value  arose  from  the  various  causes  which  con- 
curred perpetually  to  alter  the  value  of  both,  and  which  no  one  could  control 


CHANGE   OF  THE  LEGAL  RATIO  BY  THE  ACT  OF   1834,     65 

in  relation  to  silver  which  had  heretofore  existed  respecting 
gold.  ...  If  the  law  should  make  gold  too  cheap,  the  country 
would  have  no  silver  circulation.  .  .  .  We  should  soon  have 
the  same  cry  about  the  want  of  silver  coin  which  there  was 
now  about  gold.  Then  the  next  step  would  be  to  tamper  with 
the  value  of  the  dollar." 

So  long  as  the  market  ratio  was  1  :  15*7  and  the  Mint 
ratio  1 :  16,  there  would  certainly  be  a  tendency  to  the  disap- 
pearance of  silver.  But  it  was  urged  that,  inasmuch  as  the 
value  of  silver  relatively  to  gold  had  been  steadily  falling  for 
many  years,  it  was  quite  likely  that  it  would  continue  to  fall 
still  more  in  the  future.  ]^ot  knowing  the  cause  of  the  fall 
in  silver,  it  was  only  natural  that  this  error  should  have 
arisen.  The  ratio  of  1  :  16  was  therefore  urged,  because,  as 
it  was  said,  it  would  anticipate  ^  the  change  of  the  next  few 
years  in  the  market  ratio.  This,  however,  did  not  come,  as 
may  be  seen  by  Chart  YII. 

The  effects  of  the  undervaluation  of  silver,  and  the  over- 
valuation of  gold,  in  the  legal  ratio  of  1  :  16,  as  compared  with 
a  market  ratio  of  1  :  15"7,  were  soon  manifest.  Gresham's 
law  was  brought  into  play,  but  its  operation  in  this  period  was 
exactly  the  reverse  of  that  in  the  preceding  period  (1792-1834). 
In  the  latter,  the  depreciated  silver  drove  out  gold ;  in  the 
former,  the  overvalued  gold  began  to  drive  out  silver.  It  is 
evident  that  there  would  be  a  gain  in  putting  gold  into  the 
form  of  coin,  instead  of,  as  heretofore,  regarding  it  as  mer- 
chandise. A  man  could  buy  for  $15,700  an  amount  of  gold 
bullion,  which,  when  coined  for  its  owner  at  the  United  States 

If  the  ratio  should  be  fixed  to-day,  these  causes  would  change  it  to-morrow." 
Gorham  was  one  of  the  earliest  to  propose  that  for  every  payment,  beyond  a 
small  amount,  one  half  should  be  paid  in  gold,  and  one  half  in  silver.  Cf.  also 
Selden,  ibid.,  pp.  44,  46. 

'  "  We  have  seen  that  there  is  a  continual  increase  in  the  value  of  gold,  and 
if  the  increase  of  the  legal  value  cause  any  increase  in  the  market  value,  it  must 
be  evident  that  1  :  16  will,  in  a  short  time,  be  only  equal  to  the  increased  market 
value.  If  we  stop  short  of  this  [1  :  16],  we  shall  soon  be  compelled  again  to 
increase  the  value  of  that  metal,  or  to  struggle  with  the  same  difficulties  which 
now  prevent  the  circulation  of  our  precious  metals." — Jones  (Georgia),  "  Cong. 
Debates,"  vol.  x,  Part  IV,  1833-1834,  pp.  46,  56. 


66  THE  UNITED   STATES,    1792-1873. 

Mint,  possessed  a  legal  tender  coin  value  of  $16,000.  A  debt- 
or, therefore,  would  gain  $300  by  paying  his  creditor  in  gold, 
the  overvalued  metal.  And  as  there  was  such  a  premium  on 
the  use  of  gold,  so  there  was  a  corresponding  premium  on 
the  disuse  of  silver.  If  a  debtor  had  $16,000  of  silver  coin, 
he  need  take  of  it  only  $15,700,  melt  it  into  bullion,  and  in 
the  bullion  market  buy  gold  bullion,  which,  when  coined  at 
the  Mint  into  gold  coins,  would  have  a  debt-paying  power  of 
$16,000.  There  was  a  profit  of  $300  in  not  using  silver  as 
a  medium  of  exchange,  and  in  treating  it  as  merchandise. 
The  act  was  passed  in  June;  and  in  the  fall^  of  1834  gold 
began  to  move  toward  the  United  States  in  such  quantities  that 
for  a  time  some  alarm  was  created  in  London  as  to  the  amount 
of  reserves  in  the  Bank  of  England.  It  then  became  very 
difficult  to  get  silver  ^  in  the  United  States,  and  there  began 
a  displacement  of  silver  by  gold,  irrespective  of  the  issues  of 
paper  money,  which  at  last  culminated,  when  the  discoveries 
of  gold  in  1848  had  lowered  the  value  of  gold,  in  the  entire 
disappearance  of  silver.  It  can  not  be  said,  then,  that  the  act 
of  1834  was  properly  a  part  of  a  bimetallic  scheme.     For 

*  Early  in  the  fall  of  1834  (September  6th)  it  is  recorded  that  50,000  English 
sovereigns  were  imported  into  the  United  States,  and  the  statement  given  that 
arrangements  had  been  made  for  the  importation  of  2,000,000  more  ("Niles'a 
Register,"  fourth  series,  vol.  xi,  p.  1).  Another  record  was  made  of  the  arrival 
of  40,000  English  sovereigns.  In  the  last  week  of  July  400,000  sovereigns  had 
been  shipped  from  Liverpool  (ibid.,  pp.  20,  21).  A  large  part  of  this  specie,  it 
■was  said,  belonged  to  the  Bank  of  the  United  States. 

September  13th,  the  Washington  "  Globe  "  reports  the  presentation  of  $208,- 
000  in  the  form  of  foreign  gold  coins  at  the  United  States  Mint. 

In  the  third  quarter  of  1834,  $2,800,000  in  gold  coin  or  bullion  was  imported 
into  the  United  States.  The  movement  of  gold  to  the  United  States  was  so  con- 
siderable tha-t  it  excited  alarm  in  London  as  to  the  condition  of  the  Bank  of 
England.     The  drain,  however,  soon  ceased. 

^  Says  the  "  New  York  Star  "  :  "  The  keeper  of  one  of  our  principal  hotels  sent 
on  Saturday  a  $100  note  to  one  of  the  pet  banks  for  silver,  but  was  refused  it, 
only  $10  being  given,  and  $90  in  gold.  He  then  sent  the  gold  to  a  broker,  who 
charged  I  per  cent,  to  exchange  it  for  half-dollars."  The  cashier  of  an  Albany 
bank  said,  "  My  table  is  literally  loaded  with  applications  from  the  country 
banks  for  change." — "  Niles's  Register,"  fourth  series,  vol.  xiii,  p.  132,  October 
24,  1835. 


CHANGE   OF  THE   LEGAL   RATIO   BY   THE   ACT   OF   1834.      67 

certainly  we  did  not  long  enjoy  the  use  of  both  metals  in  our 
circulation.  The  very  process  by  which  gold  began  to  come 
in,  carried  silver  out  of  use.^  "  It  would  j)robably  be  safe  to 
assert  that  .  .  .  one  half  of  the  citizens  of  our  country,  born 
since  1840,  had  never  seen  a  United  States  silver  dollar.  If 
we  should  be  mistaken  in  this ;  if  it  should  be  shown  that 
one  half  of  our  people  had  seen  a  silver  dollar  some  time  in 
their  lives,  we  could  still  fall  back  on  the  well-known  his- 
toric fact  that  the  dollar  in  question  was  rarely  used  as  money 
after  1840."  ^ 

It  is  quite  clear,  however,  that  had  the  ratio  of  1 :  15*6 
been  adoj)ted  in  1834,  instead  of  a  counterfeit  bimetallism  at 
a  ratio  of  1 :  16,  the  same  results  would  have  ensued  in  the 
former  case  as  in  the  latter.  The  gold  discoveries  so  altered 
the  relative  value  of  gold  to  silver — exactly  reversing  the  situ- 
ation in  1780-1820 — that  the  system  would  again  have  been 
left  on  one  leg,  and  that  a  gold  one.  A  glance  at  Chart 
YII  will  show  that  after  1850  the  ratio  of  gold  to  silver 
moved  in  the  opposite  direction,  and,  instead  of  approaching 
1:15-6,  it  fell  to  between  1 :  15|-  and  1:15.  In  short,  a 
purely  bimetallic  scheme  in  1834  could  not  have  succeeded 
in  retaining  both  metals  in  concurrent  circulation,  owing  to 
the  impossibility  of  forecasting  the  future  supplies  of  the 
precious  metals,  to  say  nothing  of  anticipating  the  changes  in 
the  future  demand  for  them.  In  attempting  to  settle  upon 
a  legal  ratio  which  will  correspond  with  the  market  ratio  for 
any  length  of  time,  a  problem  of  the  nature  of  perpetual 

^  "  The  gold  coins  were  so  reduced  in  weight  that  it  was  now  cheaper  to  pay 
debts  in  them  than  in  silver  coins.  In  consequence,  no  more  silver  was  coined 
for  circulation,  and  the  amount  then  in  circulation,  upward  of  $50,000,000,  at 
once  disappeared,  being  sent  abroad  in  payment  of  obligations,  or  melted  down 
for  other  uses  at  home.  This  sudden  contraction  of  the  currency  [but  it  was 
filled  by  gold]  created  considerable  distress,  and  the  loss  of  the  small  silver 
pieces  caused  no  little  inconvenience.  The  panic  of  1837  followed.  Depre- 
ciated bank  bills,  *  shin-plasters,'  and  a  few  worn  Mexican  pieces  came  into 
circulation  to  take  the  place  of  full-weight  silver  pieces,  which  had  been  super* 
seded  by  the  cheaper  gold  coins." — Upton,  "Money  in  Politics,"  p.  175. 

'  Simon  Newcomb,  "International  Review,"  March,  1879,  p.  310. 


68  THE  UNITED   STATES,    1792-1873. 

motion  is  encountered.  Calculation  must  be  made  not  merely 
as  to  the  future  value  of  silver,  but  also  as  to  the  future 
value  of  gold.  I^either  of  these  things  is  possible.  The 
value  of  each  metal  depends  on  its  own  demand  and  supply ; 
60  that  for  the  two  metals  there  are  four  independent  factors 
to  be  considered.  It  is  absurd  to  suppose  that,  if  there 
should  be  a  change  in  one  of  these  factors,  there  should  ipso 
facto  be  changes  in  the  three  other  factors  of  such  a  charac- 
ter as  to  neutralize  the  change  in  one.  The  situation  is  like 
a  table  resting  on  four  legs.  Two  of  these  legs  at  one  end 
may  represent  the  demand  and  supply  of  silver,  and  the  two 
at  the  other  end  the  demand  and  supply  of  gold.  The  first 
two  fix  the  height  of  the  table  at  one  end  relatively  to  the 
height  at  the  other  end  ;  moreover,  a  change  in  one  leg  will 
cause  a  destruction  of  the  general  level  of  the  table,  not  to 
be  counterbalanced  except  by  an  accommodating  change  in 
each  of  the  other  three.  But  it  is  impossible  that  these 
changes  should  be  either  in  a  direction  or  extent  that  should 
exactly  offset  the  effect  of  an  interfering  change  in  but  one 
factor.  It  is  well  worth  notice,  too,  that  changes  of  this  de- 
scription were  going  on  in  the  values  of  both  gold  and  silver 
in  the  years  when  there  was  no  complaint  that  discrimination^ 
was  exercised  against  one  metal  or  another. 

We  can  see,  then,  that  the  ratio  of  1 :  16  resulted  in  a  move- 
ment of  silver  out  of,  and  of  gold  into,  the  circulation,  some- 
what earlier  than  it  would  have  come  about  had  the  ratio  of 
1:15-6  been  adopted ;  but  the  movement,  operating  with  no 
great  force  for  a  few  years,  received  an  unexpected  momen- 
tum from  the  gold  discoveries,  which,  by  lowering  the  mar- 
ket value  of  gold  toward  1 :  15,  made  the  overvaluation  of 
gold  in  the  legal  ratio  of  1 :  16  still  more  evident,  and  so  still 
further  increased  the  profit  in  coining  gold  and  melting  sil- 

'  Except  possibly  the  charge  that  England  "  discriminated "  against  silver 
by  confining  it  to  her  subsidiary  coinage  in  1816,  which  could  have  had  no  effect 
such  as  has  been  described,  between  1780-1820,  on  the  fall  of  silver.  And  the 
desire  of  the  Jackson  party  for  gold  was  not  accompanied  by  any  "  hatred  "  of 
silver,  but  by  only  opposition  to  bank  issues. 


CHART    VIII. 
the  Coinage  of  Gold  and  Silver  at  the  UniUd  Slates  Mint,  lSSi-1860.     Ratio,  1  :  U9S.     Silver  I  I      Gold  ■ 


1834 

183S  ■  '■ 

1836 

1837 

1838 

1839 

1840 

1841 

1842 

1843 

1844 

1845 

1846 

1847 

1848 

1849 

1860 

1651 

1852 

1853 

1864 

1855 

185G 

1867 

1868 

1869 

1860 


CHANGE  OF  THE  LEGAL  RATIO  BY  THE  ACT   OF   1834.      69 

ver  into  bullion.  We  should  expect,  therefore,  to  find  a  con- 
firmation of  this  explanation  in  the  movement  of  gold  and 
silver  to  the  Mint  of  the  United  States.  In  the  preceding 
period  of  1780-1834,  we  saw  by  Chart  II  that  the  coinage  of 
silver,  the  cheaper  metal,  preponderated  ;  and  now  we  can 
see,  in  Chart  YIII,  a  similar  movement,  but  very  much  more 
marked,^  in  the  opposite  direction.  The  coinage  of  the  over- 
valued gold  soon  preponderated  over  that  of  silver.  A  com- 
parison of  Chart  YIII  with  Chart  II  will  show  the  force  and 
opposing  direction  of  the  influences  at  work  in  the  two 
periods  in  a  very  distinct  manner.  It  will  be  remembered 
that  the  silver  coinage  was  chiefly  of  denominations  below  a 
dollar.  Of  silver  dollar  pieces,  not  a  single  one  was  coined 
from  1806  to  1836,  and  thereafter  only  in  very  small  quanti- 
ties. But,  so  far  as  the  Mint  figures  tell  the  story,  a  very 
considerable  movement  of  gold  to  the  Mint  did  not  begin 
until  18'13;  for  the  Russian  mines  began  by  that  time  to 
sensibly  increase  the  supply  of  gold. 

§  5.  The  act  of  1834  changed  the  legal  ratio  from  1  :  15 
to  1 :  16.  The  readjustment  of  the  weights  of  the  coins  in 
order  to  meet  this  change  could  have  been  made  in  two  ways : 
(1)  either  by  increasing  the  number  of  grains  in  the  silver 
dollar  until  it  had  reached  the  value  of  the  gold  dollar,  and 
thus  restored  to  it  the  value  it  had  lost  by  its  depreciation ; 
or  (2)  by  lessening  the  weight  of  the  gold  dollar  until  it  had 
been  accommodated  to  the  fall  in  the  value  of  the  silver  dol- 
lar. The  latter,  unfortunately,  was  the  course  adopted.  It 
is  to  be  regretted  that,  in  this  manner,  we  laid  ourselves  open 
to  the  charge  of  debasing  our  coinage ;  ^  but  it  is  true.    The 

'  The  lines  in  Chart  VIII,  owing  to  the  larger  figures,  are  drawn  on  a  smaller 
scale  than  those  of  Chart  II  for  the  earlier  period. 

«  Whitman  ("  Report  of  18Y8,"  p.  556)  recognized  this  fact  in  1821 :  "  It  will, 
of  course,  be  objected  that,  if  we  should  now  render  gold  four  per  cent  better, 
we  shall  thereby  put  into  the  hands  of  its  present  holders  a  clear  net  gain  to 
that  amount,  provided  they  hold  it  with  an  intent  to  use  it  in  this  country.  But 
it  is  not  perceived  how  this  will  injure  the  public  or  individuals.  And  it  will 
not  be  regretted  by  the  benevolent  that  individuals  should  be  benefited,  if  no 


70  THE  UNITED  STATES,   1Y92-18'73. 

amount  of  pure  silver  in  the  dollar  was  left  unchanged  at  371  "25 
grains ;  but  the  amount  of  pure  gold  in  the  gold  eagle  was 
diminished  from  247*5  grains  to  232  grains.  This  debased  the 
gold  coins  of  the  United  States  6*26  per  cent,  and  to  that  ex- 
tent the  law  gave  gold  a  less  legal-tender  value  than  it  had  pos- 
sessed before  1834.  I^ot  knowing  that  the  Mexican  product 
had  lowered  the  value  of  silver,  and  that  gold  had  not  risen 
in  value  in  1820,  our  statesmen  refused  to  maintain  the  unit 
of  unchanged  purchasing  power  represented  at  that  time  by 
gold,  and  dropped  to  the  level  of  the  cheapened  silver  stand- 
ard. By  adhering  to  the  dollar  of  silver,  and  altering  the 
gold  coins  to  suit  it,  we  had  the  appearance  of  retaining  "  the 
dollar  of  our  fathers,"  but  we  overlooked  the  essential  fact 
that  this  silver  dollar  had  fallen  seriously  in  value. 

Mr.  Ingham  took  the  ground  ^  in  1830  that  silver  should 
be  adopted  as  the  standard  of  the  United  States,  because  all 
contracts  were  at  that  time  practically  made  in  terms  of  sil- 
ver, and  because  for  many  years  silver  had  been  the  only 
coin  in  circulation.  This  does  not  seem  to  me  a  tenable 
position.  The  highest  justice  is  rendered  by  the  state  when 
it  exacts  from  the  debtor  at  the  end  of  a  contract  the  same 
j>u7'chasing  power  which  the  creditor  gave  him  at  the  begin- 
ning of  the  contract,  no  less,  no  more.  The  statement  of 
Mr.  Ingham  does  not  imply  that  contracts  should  be  paid  in 
silver,  because  silver  furnished  the  unit  which  had  varied 
least  in  value.  His  conclusion  was,  of  course,  based  on  no 
such  position  ;  but  only  on  such  a  supposition  could  it  be 

one  be  injured."  As  if  a  change  of  standard  could  benefit  some  without  at  the 
same  time  injuring  others !  He  goes  on  to  say :  "  If,  however,  individual  wealth 
be  a  public  blessing,  all  will  be  benefited.  At  any  rate,  this  is  an  incident 
utterly  unavoidable,  to  a  certain  extent,  in  this  case.  It  must  be  submitted  to, 
as  otherwise  a  positive  national  evil  of  great  magnitude,  as  your  committee 
deem  it,  must  be  encountered."  The  national  evil  he  referred  to  was  the  disap» 
pearance  of  gold,  which  was  due  to  a  ratio  which  drove  out  silver.  But  he  did 
not  think  the  debasement  of  the  standard  should  be  considered  in  comparison 
with  the  disappearance  of  gold ;  without  seeming  to  reflect  that  gold  could  have 
been  restored  equally  well  by  increasing  the  weight  of  the  silver  dollar,  and  that 
thereby  we  could  have  escaped  the  charge  of  a  debasement  of  the  coinage. 
»  "Report  of  1878,"  p.  568. 


CHANGE   OF  THE  LEGAL  RATIO   BY   THE  ACT  OF   1834.     Yl 

just.  To  claim  that  tlie  amount  of  silver  in  a  dollar  ought 
not  be  raised,  because  all  contracts  were  payable  in  silver, 
would  have  been  just  only  if  he  had  proved  that  silver  had 
not  changed  in  its  purchasing  power.  Those  whose  contracts 
were  paid  in  silver,  after  that  metal  had  fallen  in  value,  lost 
an  amount  of  purchasing  power  equivalent  to  the  deprecia- 
tion. 

It  is  not  certain,  also,  that  after  the  act  of  1834  drove 
out  silver,  contracts  entered  into  before  1834  were  protected 
by  retaining  the  original  weight  of  the  silver  dollar.  For  ex- 
ample, before  1834  a  debt  might  have  been  paid  either  by 
100  ounces  of  pure  gold,  or  1,500  ounces  of  pure  silver,  in 
coin  ;  after  1834,  the  debt,  owing  to  the  debasement  of  the 
gold  coins,  could  be  paid  by  94  ounces  of  pure  gold  in  coin, 
or  1,500  ounces  of  pure  silver  in  coin.  But  if  silver  was 
practically  out  of  circulation,  the  creditor,  in  receiving  94 
ounces  of  gold,  would  obtain  in  terms  of  silver  only  what 
silver  bullion  he  could  buy  with  the  gold.  If  the  market 
rate  were  1 :  15*7,  he  would  have  received  of  silver  only 
1475-5  ounces  of  silver  bullion,  thus  suffering  a  loss  of  24*5 
ounces  of  silver.  On  this  supposition,  contracts  were  not 
protected  by  retaining  the  monetary  unit  as  fixed  in  the 
dollar  made  of  the  depreciated  silver.  Indeed,  Mr.  Ingham 
saw  the  effect,  in  case  of  a  disappearance  of  silver,  when  he 
said,  "  Successive  changes  of  this  nature  must  in  time  sub- 
ject the  policy  of  this  Government  to  the  reproach,  which 
has  been  so  justly  cast  upon  those  of  the  Old  World,  for 
the  unwarrantable  debasement  of  their  coins."  And  this  was 
exactly  what  happened.^  Moreover,  full  warning  ^  of  this  was 
given  in  the  debates  in  Congress. 

'  Before  1884  the  gold  eaf^le  was  worth  in  silver  coin  $10.66^.  The  act  of 
1834  reduced  its  value  to  $10. — "  I  may  remark  that  the  total  United  States 
[gold]  coin  returned  to  us  from  the  change  of  standard  to  the  close  of  this  year 
(1852)  is  but  $1,534,963,  showing  that,  of  over  twelve  millions  issued  prior  to 
1834,  but  a  small  portion  had  remained  in  the  country." — G.  N.  Eckert,  Director 
of  the  Mint,  January  17,  1853. 

^  Mr.  Binney  said :  "  If  [gold  is]  overvalued,  its  effect  would  be  to  enable  a 
debtor  to  pay  his  present  debts  with  less  than  he  owed;  and  to  that  extent,  con- 


Y2  THE   UNITED   STATES,    1'792-18'73 

As  was  to  have  been  expected,  the  effect  of  this  debase- 
ment was  not  confined  to  the  time  in  which  it  occurred.  Its 
evil  lived  after  it,  and  came  up  in  the  form  of  precedent. 
It  would  not  be  unnatural  that  it  should  raise  its  ugly  head, 
if  it  is  desired  in  the  future  to  tamper  with  contracts  by 
altering  the  standard  of  payments,  since  it  has  already  been 
quoted  as  a  precedent  by  the  Supreme  Court  of  the  United 
States  in  the  second  legal-tender  decision  ^  of  1871.     Since 

sequently,  to  defraud  his  creditor ;  and  it  would,  if  it  [the  overvaluation]  is  con- 
siderable, place  silver  exactly  in  the  condition  in  which  gold  now  was,  and  make 
it  an  article  of  trade  instead  of  currency." — "  Cong.  Debates,"  vol.  x,  Part  IV, 
1833-1834,  p.  4C65.  Ewing  "  contended  that  it  would  impair  existing  contracts." 
— Ibid.,  p.  4669.  As  to  the  matter  of  debasement,  Webster  gave  a  characteris- 
tic reply :  "  If  it  had  been  imagined  that  there  would  have  been  any  evil,  it 
would  not  have  been  recommended." — "  Cong.  Debates,"  vol.  x,  Part  II,  1833- 
1834,  p.  2121. 

'  In  discussing  the  fifth  amendment,  which  forbids  taking  private  property 
without  just  compensation  or  due  process  of  law,  the  decision  reads  :  "  By  the 
act  of  June  28,  1834,  a  new  regulation  of  the  weight  and  value  of  gold  coins 
was  adopted,  and  about  6  per  cent  taken  from  the  weight  of  each  dollar.  The 
effect  of  this  was  that  all  creditors  were  subjected  to  a  corresponding  loss. 
The  debts  then  due  became  solvable  with  6  per  cent  less  gold  that  was  required 
to  pay  them  than  before.  .  .  Was  the  idea  ever  advanced  that  the  new  regu- 
lation of  gold  coin  was  against  the  spirit  of  the  fifth  amendment  ?  ...  It  is 
said,  however,  now,  that  the  act  of  1834  only  brought  the  legal  value  of  gold 
coin  more  nearly  into  correspondence  with  its  actual  value  in  the  market,  or  its 
relative  value  to  silver.  But  we  do  not  see  that  this  varies  the  case,  or  dimin- 
ishes its  force  as  an  illustration.  The  creditor  who  had  a  thousand  dollars  due 
him  on  the  31st  day  of  July,  1834  (the  day  before  the  act  took  effect),  was  en- 
titled to  a  thousand  dollars  of  coined  gold  of  the  weight  and  fineness  of  the  then 
existing  coinage.  The  day  after  he  was  entitled  only  to  a  sum  6  per  cent  less  in 
weight  and  in  market  value,  or  to  a  smaller  number  of  silver  dollars.  Yet  he 
would  have  been  a  bold  man  who  had  asserted  that,  because  of  this,  the  obliga- 
tion of  the  contract  was  impaired,  or  that  private  property  was  taken  without 
compensation  or  without  due  process  of  law." 

On  the  point  that  the  "  obligation  of  a  contract  to  pay  money  is  to  pay  that 
which  the  law  shall  recognize  as  money  when  the  payment  is  to  be  made,"  it 
was  laid  down:  "No  one  ever  doubted  that  a  debt  of  one  thousand  dollars,  con- 
tracted before  1834,  could  be  paid  by  one  hundred  eagles  coined  after  that  year, 
though  they  contained  no  more  gold  than  ninety-four  eagles,  such  as  were  coined 
when  the  contract  was  made ;  and  this,  not  because  of  the  intrinsic  value  of  the 
coin,  but  because  of  its  legal  value." — "  Banker's  Magazine,"  1871-18Y2,  pp. 


CHANGE   OF  THE   LEGAL   RATIO   BY   THE   ACT   OF   1834.      73 

even  monetary  irregularities,  after  being  enacted  into  law, 
have  tlie  sacredness  of  legal  precedent,  a  legislator  may  well 
pause  before  dealing  with  such  questions  as  these  in  haste,  or 
in  obedience  to  party  policy. 

§  6.  The  act  of  1834  was  supplemented  by  a  law  in  183Y  ^ 
which  changed  the  proportion  of  alloy  to  pure  metal  in  our 
coins.  It  will  be  remembered  that  Hamilton  recommended 
■y-  of  the  weight  to  be  pure,  and  -^  to  be  alloy  for  both  gold 
and  silver  coins.  This  recommendation,  however,  was  car- 
ried out  only  in  respect  of  gold  coins  in  the  act  of  1792  ;  for 
silver  coins  were  issued  with  an  alloy  ^  of  slightly  more  than 
■^,  or  in  the  proportion  of  371*25  grains  pure,  in  416  grains  of 
standard,  silver.  Therefore,  the  original  silver  dollar,  as  it 
was  coined  from  1792  to  1837  (and  100  cents  of  the  subsidi- 
ary coinage  also),  weighed  416  grains,  "  standard  weight " — 
that  is,  the  pure  silver  plus  the  alloy.  The  416-grain  dollar, 
of  course,  contained  371*25  grains  of  pure  silver. 

In  1837  a  very  sensible  reform  was  made  by  establishing 
the  same  proportion  of  alloy  for  both  gold  and  silver  coins ; 
and  by  making  that  proportion  ^i^j^,  which  was  equivalent  to 
saying  that  the  amount  of  pure  metal  in  a  coin  should  always 
be  -jSL  of  its  standard  weight,  or  900  thousandths  fine.  This 
is  our  present  system,  and  the  amount  of  pure  metal  in  a 
coin  can  now  be  found  by  subtracting  -^  from  its  full  or 
standard  weight ;  or  the  standard  weight  can  be  found  by 
adding  ^  to  the  weight  of  the  pure  metal.  Pure  gold  and 
silver  is  defined  as  1,000  thousandths  fine. 

By  the  act  of  1834,  the  pure  gold  in  an  eagle  (no  gold 
dollar  pieces  were  yet  coined)  was  reduced  from  tlie  weight 
of  247*5  grains  given  by  act  of  1792  to  232  grains,  and  the 
standard  weight  fixed  at  258  grains.  This,  in  decimal  terras, 
was  equivalent  to  899*225  thousandths  fine  for  our  gold  coin- 
age.  The  act  of  1837,  therefore,  slightly  changed  the  quantity 

■  See  act,  Appendix  III. 

^  That  is,  the  fineness,  in  the  act  of  1*792,  when  reduced  to  decimal  terms, 
was  for  gold  coins  916-66|,  and  for  silver  coins  892-43  thousandths. 


74  THE  UNITED  STATES,   1 792-1 8'73. 

of  pure  gold  from  232  grains  to  232-2  grains,  retaining  the 
standard  weight  of  258  grains,  and  thus  gave  exactly  900 
thousandths  tine  for  the  eagle,  as  well  as  for  our  other  gold 
coins  of  less  denominations  which  contained  weights  propor- 
tional to  the  eagle.  This  addition  of  -^  of  a  grain  to  the 
pure  gold  makes  the  legal  ratio  between  gold  and  silver  coins 
371-25  :  23-22,  or  15-98+  to  1;  while  in  the  act  of  1834 
the  ratio  was  almost  exactly  16 :  1  (371-25  :  23-2). 

In  dealing  with  the  weight  of  the  silver  dollar,  the  amount 
of  pure  silver  in  it  was  left  untouched,  as  it  was  fixed  by  the 
act  of  1792,  at  371-25  grains.  But  in  order  to  establish  the 
ratio  of  alloy  at  Jjj-,  the  standard  weight,  which  was  fixed  at 
416  grains  in  the  act  of  1792,  was  changed  in  1837  to  412^ 
grains.  This  is  the  origin  of  the  common  name  of  "  41 2^^- 
grain  dollar.''  It  dates  from  1837  ;  although  the  quantity 
of  pure  silver  in  it  has  been  unchanged  since  the  act  of  1792  j 
412^  grains  is  its  "  standard  weight." 


CHAPTER  y. 

THE   GOLD   DISCOVEEIES   AND   THE   ACT   OF    1853. 

§  1.  The  discoveries  of  gold  in  Russia,  Australia,  and 
California,  by  which  the  gold  product  reached  its  highest 
amount  soon  after  1851,  form  an  epoch  in  the  monetary  his- 
tory of  every  modern  state  with  a  specie  circulation.  They 
have  been  the  most  important  events  in  the  later  history  of 
the  precious  metals,  and  their  effect  upon  the  relative  values 
of  gold  and  silver  has  been  serious  and  prolonged.  It  is  not 
too  much  to  say  that  almost  all  the  bimetallic  discussions  of 
recent  yeai's  would  not  have  arisen  had  this  unexpected  and 
astonishing  stream  of  gold  from  the  mines  of  both  the  Old 
and  the  New  World  never  been  poured  upon  the  market. 
From  it  date  almost  all  our  modern  problems  relating  to 
gold  and  silver,  and,  as  we  shall  later  see,  we  can  not  discuss 
the  silver  question  of  to-day  without  reference  to  this  extraor- 
dinary production  of  gold. 

The  figures  of  annual  production,  which  are  elsewhere^ 
given,  show  the  extent  of  the  addition  which  was  made  to 
the  world's  supply  already  in  existence.  From  an  average 
annual  production  in  1840-1850  of  about  $38,000,000,  the 
gold  supply  increased  to  a  figure  beyond  $150,000,000  after 
1850.  The  effect  of  this  increase  was  unquestionably  to 
lower  the  value  of  gold  ;  in  other  words,  to  diminish  its  pur- 
chasing power  over  commodities  of  general  consumption.^  It 
was  one  of  those  unexpected  events  which  no  human  sagacity 

*  See  Appendix  I. 

*  See  Jevons,  "  A  Serious  Fall  in  the  Value  of  Gold  ascertained  "  (1863). 


76  THE  UNITED  'STATES,   1 792-1 STS 

could  have  foreseen ;  and,  as  it  seriously  affected  the  value 
of  one  of  the  two  metals  in  our  double  .standard,  it  threw  a 
new  obstacle  in  the  way  of  its  succe.ssful  progress.  There 
being  a  fall  in  the  value  of  gold  this  time,  instead  of  a  fall 
in  the  value  of  silver  as  before,  the  ner^ossi^ ;'  arose  of  a  new 
adjustment  of  the  legal  ratio  for  our  golu  and  silver  coins  in 
order  to  keep  both  metals  in  circulation.  That  is,  if  bimet- 
allism was  to  be  continued,  the  exp^^i-ience  of  the  United 
States  required  a  constant  readjustnjeni  of  the  Mint  ratio.lo 
the  market  ratio,  because  of  constant  cb.'inges  in  the  relative 
values  due  to  natural,  and  so  to  unforeseen,  causes.  After  an 
experience  of  sixty  years,  did  the  Unite/:  States  propose  to 
continue  a  nominal  double  standard  after  its  constant  failure 
to  keep  both  metals  in  circulation  ?  We  shall  confine  our- 
selves to  this  question  in  the  present  chapter,  and  to  the  legis- 
lation in  which  the  decision  on  this  matter  was  contained. 

The  extraordinary  change  in  the  annual  production  of  gold 
is  made  clear  by  noticing  in  Chart  IX  the  rise  of  the  space  cov- 
ered by  yellow  after  1850,  and  comparing  this  with  the  extent 
of  the  space  covered  by  the  same  color  in  earlier  periods.^ 

Of  the  general  and  more  important  effects  ensuing  from 
the  increased  gold  production  I  shall  speak  in  a  later  chapter,^ 
in  connection  with  its  influence  on  the  value  of  silver. 

§  2.  When  the  value  of  gold  fell  under  the  regular  flow 
of  a  new  and  extraordinary  supply,  as  might  have  been  ex- 
pected, Gresham's  law  began  to  work  more  actively  than 
ever.  It  has  been  seen  already  that  the  Mint  ratio  of  1 :  16 
began  in  1834  the  movement  which  was  slowly  substituting 
gold  for  silver.  The  fall  in  the  value  of  gold  now  aggra- 
vated this  tendency  into  a  serious  evil.  The  divergence  be- 
tween the  legal  and  the  market  ratios  clearly  revealed  by 
1849,  at  the  latest,  a  long-standing  error  in  regard  to  the 
subsidiary  coinage.  In  1834  an  ounce  of  gold  bought  about 
15*7  ounces  of  silver  in  the  bullion  market  (but  16  ounces 

»  Chart  rs  is  taken  from  Dr.  Soetbeer's  "  Edelmetall-Production,"  1819. 
*  See  chap.  viii. 


M  EX  ICO. 

1521—1875. 


GOLD $184,865,400 

SILVER.    ----  3,429,243,000 


CHART  SHOWING  THE  PRODUCTION  OF  GOLD  AND  SILVER  IN  DIFFERENT 
COUNTRIES  ACCORDING  TO  VALUE.  1493-1875. 


POTOSI  AND  BOLIVIA 

1545—1875. 


GOLD,  . 
SILVER, 


.$205,065,000 
1,697,292,000 


UNITED  STATES. 


GOLD, $1,413,204,750 

SILVER,       ..      237,217.500 


PERU. 

1833-1875. 

GOLD,  $114,076,125 

SILVER.         1,404,990,000 


AUSTRALIA. 

1852—1875. 
GOLD, $1,263,870,000 


NEW  GRENADA. 


RUSSIA. 

1741-1875. 

GOLD.    ._.  $720,974,362 
SILVER,    ...109,302,300 


BRAZIL. 

1601-1875. 
GOLD,     $723,342,375 


AUSTHIA-HUNC 

AHV. 

GOLD...«2I,ao 

z 

CHART  SHOWING  THE  PRODUCTION  OF  GOLD  AND  SILVER 
ACCORDING  TO  VALUE,  BY  PERIODS.  1493-1880. 


THE  GOLD  DISCOVERIES  AND  THE  ACT   OF   1853.  77 

in  the  form  of  coin).  In  tlie  period  we  are  now  consid- 
eringy  however,  since  gold  had  fallen  in  value,  one  ounce  of 
gold  could  buy  15-7  ounces  no  longer,  but  a  less  number, 
which  in  1853  was  about  154  ounces.  It  will  be  seen  at 
once  that  this  widened  the  difference  between  the  Mint 
ratio  of  1 :  16  and  the  market  ratio,  and  so  offered  a  greater 
profit  to  the  watchful  money-brokers.  Being  able  to  make 
legal  payment  of  a  debt  either  in  silver  or  gold,  a  man  hav- 
ing 1,600  ounces  of  silver  could  take  only  1,540  of  them  to 
the  bulHon  market,  and  there  buy  100  ounces  of  gold,  which 
would  by  law  be  a  legal  acquittal  of  his  debt.  He  would 
thus  gain  60  ounces  by  paying  his  debt  in  gold  rather  than 
in  silver.  When  the  ratio  was  1 :  15-7,  he  would  have  gained 
only  30  ounces.  So  that  the  fall  in  the  value  of  gold  acted 
to  increase  the  speed  with  which  gold  drove  out  silver. 

This  changed  relation  is  to  be  found  in  the  quotations  of 
silver  coins  in  gold  prices.  The  amount  of  pure  silver  in  a 
dollar,  or  two  halves,  four  quarters,  etc.,  was  371*25  grains  ; 
in  a  gold  dollar,  23*2  grains.  The  act  of  1834  had  said  that 
gold  was  16  times  as  valuable  as  silver,  and  that  23-2  grains 
of  gold  should  be  equivalent  to  3Y1'25  grains  of  silver  ;  but 
the  market  is  unaffected  by  legal  decrees,  and  values  are  not 
fixed  by  any  legislature.  The  market  values  of  the  two 
metals  in  1853  having  then  assumed  a  relation  of  about 
1 :  15"4,  a  gold  dollar^  could  buy  15*4  times  23*2  grains  of  sil- 
ver in  the  market,  or  357^  grains.  This  amount  was  14  grains 
less  than  the  legal  silver  dollar.  But  if  357|^  grains  was  the 
market  equivalent  of  a  gold  dollar,  371^  grains  would  be 
worth  more  than  a  gold  dollar  in  the  market ;  that  is,  silver 
dollars  were  worth  about  104  cents  of  a  gold  coin  in  1853, 
and  even  rose  to  105  cents  in  1859.^  Taking  these  figures,  it 
will  be  seen  in  another  way  why  it  was  unprofitable  to  use  a 

*  Gold  dollar  pieces  were  first  coined  in  1849.  See  laws  of  the  United 
States  in  Appendix  III. 

^  For  a  table  of  the  value  of  a  silver  dollar  in  gold  coin  from  1834  to  1876, 
showing  that  it  had  always  been  above  the  value  of  a  gold  dollar  since  1834, 
see  Appendix  V. 

7 


ij^g  THE  UNITED  STATES,   1V92-18'73. 

silver  coin  as  a  medium  of  exchange.  If  a  dollar  of  silver 
was  worth  104  cents  in  gold  coin,  and  since  gold  coin  was  a 
legal  tender  for  all  payments,  no  one  would,  on  grounds  of 
self-iQterest,  choose  to  pay  104  cents  when  100  cents  would 
serve  the  same  pui-pose.  Consequently,  only  the  cheaper 
metal  was  used,  and  that  was  gold,  while  silver  was  wholly 
banished  from  use  as  money,  and  in  the  United  States  be- 
came an  article  of  merchandise  only. 

But  this  went  further  than  ever  before.  It  will  be  re- 
called that  the  subsidiary  coinage  of  silver  had  since  1792 
contained  weights  of  pure  silver  proportional  to  the  weight  of 
the  dollar  piece  ;  that  is,  two  halves,  four  quarters,  ten  dimes, 
and  twenty  half -dimes,  contained  as  much  pure  silver  as  a  dol- 
lar piece,  or  371^  grains.  Consequently,  if  a  dollar  piece  of  sil- 
ver had  become  worth  104  cents  in  gold,  two  halves,  four  quar- 
ters, etc.,  would  have  become  worth  the  same  sum  in  gold ; 
therefore  the  profit  in  exchanging  gold  for  subsidiary  silver 
was  such  that  it  was  also  driven  from  use.  A  half -eagle  ex- 
changed for  ten  half-dollars  gave  the  same  profit  as  when  ex- 
changed for  five  separate  dollar  pieces.  In  this  way  all  the 
silver  used  for  small  "  change,"  the  subsidiary  coinage,  dis- 
appeared from  circulation.  Through  the  operation  of  Gresh- 
am's  law  even  the  coins  needed  for  small  retail  transactions 
had  been  reached,  and  the  business  of  the  country  became 
seriously  embarrassed  by  the  want  of  small  coins.^  "We  have 
had  but  a  single  standard  for  the  last  three  or  four  years,"  said 
Mr.  Dunham^  in  behalf  of  the   Committee  of  Ways  and 

*  "  There  is,  then,  a  constant  stimulant  to  gather  up  every  silver  coin  and 
send  it  to  market  as  bullion  to  be  exchanged  for  gold,  and  the  result  is  the 
country  is  almost  devoid  of  small  change  for  the  ordinary  small  business  trans- 
actions, and  what  we  have  is  of  a  depreciated  character.  This  does  not  injure 
your  Wall  Street  brokers,  who  deal  by  thousands.  They  are  making  a  profit  by 
it ;  but  it  is  a  serious  injury  to  the  laboring  millions  of  the  country  who  deal  in 
small  sums." — C.  L.  Dunham,  "  Congressional  Globe,"  Appendix,  2d  session, 
82d  Congress,  p.  190,  February  1,  1853. 

2  Ibid.,  p.  190.  Mr.  Skelton  (New  Jersey)  remarked:  "Gold  is  the  only 
standard  of  value  by  which  all  property  is  now  measured ;  it  is  virtually  the 
only  currency  of  the  country." — "  Congressional  Globe,"  vol.  xxvi,  2d  session, 
32d  Congress,  p.  629.     "  The  expense  of  coining  a  given  value  of  silver  into 


THE   GOLD   DISCOVERIES   AND  THE  ACT  OF   1853.  79 

Means  in  1850 ;  "that  has  been  and  now  is  gold,"  In  short, 
by  1850  the  people  of  the  United  States  found  themselves 
with  a  single  standard  of  gold,  but  without  enough  silver  to 
serve  for  necessary  exchanges  in  retail  transactions.  The 
balancing  plank  in  this  vacillating  system  had  now  tipped 
quite  in  the  other  direction,  for  before  1834  the  silver  end 
was  up.  !N"ow  it  was  the  gold  end.  How  soon  would  it  be 
the  silver  end  again,  if  we  adhered  to  such  a  system  ? 

This,  then,  was  the  situation  produced  by  the  gold  dis- 
coveries in  connection  with  the  act  of  1831,  establishing  the 
ratio  of  1  :  16.  It  now  remains  for  me  to  recount  the  remedy 
which  Congress  was  again  forced  to  apply  to  the  situation 
as  a  corrective.  As  we  shall  see,  tlie  difficulties  were  met 
much  more  intelligently  than  ever  before. 

§  3.  The  act  of  1853  was  a  practical  abandonment  of  the 
double  standard  in  the  United  States.  There  was  virtually 
no  opposition  to .  the  bill,  even  though  its  real  purpose  was 
openly  avowed  in  the  clearest  way  in  the  House  by  Mr.  Dun- 
ham, who  had  the  measure  in  charge  and  who  showed  an 
admirable  knowledge  of  the  questions  involved :  ^ 

"Another  objection  urgecT  against  this  proposed  change  is 
that  it  gives  us  a  standard  of  gold  only.  .  .  .  What  advantage 
is  to  be  obtained  by  a  standard  of  the  two  metals,  which  is  not 
as  well,  if  not  much  better,  attained  by  a  single  standard,  I  am 
unable  to  perceive  ;  while  there  are  very  great  disadvantages 
resulting  from  it,  as  the  experience  of  every  nation  which  has 
attempted  to  maintain  it  has  proved.  .  .  .  Indeed,  it  is  utterly 
impossible  that  you  should  long  at  a  time  maintain  a  double 
standard.  .  .  .  Gentlemen  talk  about  a  double,  standard  of 
gold  and  silver  as  a  thing  that  exists,  and  that  we  propose  to 
change.      We  have  had  but  a  single  standard  for  the  last  three 

the  smaller  coins  is  much  greater  than  into  the  large,  and  when  coined  the  great 
demand  for  them  gives  them  a  higher  currency  value  than  that  assigned  by  law. 
As  a  proof  of  thi?,  the  demand  for  silver  for  exportation  has  not  operated  as  yet 
upon  these  smaller  coins ;  that  is  to  say,  the  dime  and  half-dime  (the  quarter,  too, 
has  been  partially  exempted),  while  it  has  swept  the  silver  dollar  and  half-dollar 
from  the  country." — Hunter,  Chairman  Fin.  Com.  of  Sen.,  "  Report  No.  104," 
1st  session,  32d  Congress,  p.  11. 

•  "Congressional  Globe,"  Appendix,  2d  session,  32d  Congress,  p.  190. 


80  THE   UNITED   STATES,   1'792-18'73. 

or  four  years.  That  has  been,  and  now  is,  gold.  We  2^ropose 
to  let  it  remain  so,  and  to  adapt  silver  to  it,  to  regulate  it 
by  it.'' 

In  answer  to  another  plan,  the  same  speaker^  said  : 

"  We  would  thereby  still  continue  the  double  standard  of 
gold  and  silver,  a  thing  the  committee  desire  to  obviate.  They 
desire  to  have  the  standard  currency  to  consist  of  gold  only, 
and  that  these  silver  coins  shall  be  entirely  subservient  to  it, 
and  that  they  shall  be  used  rather  as  tokens  than  as  standard 
currency." 

We  have  heard  a  great  deal  in  later  years  about  the  sur- 
reptitious demonetization  of  silver  in  1873.  There  was,  how- 
ever, vastly  too  much  criticism  wasted  on  the  act  of  1873 ;  for 
the  real  demonetization  of  silver  in  the  United  States  was 
accomplished  in  1853.  It  was  not  the  result  of  accident ;  it 
was  a  carefully  considered  plan,  deliberately  carried  into  legis- 
lation in  1853,  twenty  years  before  its  nominal  demoneti- 
zation by  the  act  of  1873.  The  act  of  1853  tried  and  con- 
demned the  criminal ;  and,  after  twenty  years  of  waiting  for 
a  reprieve,  the  execution  only  took  place  in  1873.  It  was  in 
1853  that  Congress,  judging  from  our  own  past  experience 
and  that  of  other  countries,  came  to  the  conclusion  that  a 
double  standard  was  an  impossibility  for  any  length  of 
time. 

It  can  not  be  said,  however,  that  this  conclusion  was 
reached  wholly  throngh  nnselfish  reasons.  The  underlying 
prejudice  in  favor  of  gold,  if  gold  can  be  had,  which  we 
are  sure  to  find  deeply  seated  in  the  desires  of  our  business 
community  whenever  occasion  gives  it  an  opportunity  for  dis- 
play, was  here  manifesting  itself.  The  country  found  itself 
with  a  single  metal  in  circulation.  Had  that  metal  been  sil- 
ver, we  should  have  had  to  chronicle  again  the  grumbling 
dissertations  on  the  disappearance  of  gold  which  character- 
ized the  period  preceding  1834.  But  in  1853  the  single 
standard  was  gold.  This  was  a  situation  which  no  one  re- 
belled against.     Indeed,  no  one  seemed  to  regard  it  as  any- 

'  "  Congressional  Globe,"  Appendix,  2d  session,  3  2d  Congress,  p.  190. 


THE   GOLD  DISCOVERIES  AND   THE  ACT  OF   1853.  81 

thing  else  tlian  good  fortune  (except- so  far  as  the  subsidiary 
coins  had  disappeared).  It  was  very  much  as  if  a  ranchman, 
starting  with  one  hundred  good  cattle  and  one  hundred  in- 
ferior ones,  had  found,  when  branding-time  came,  that,  by 
virtue  of  exchange  with  his  neighbors,  the  two  hundred  cat- 
tle assigned  to  him  were,  in  his  judgment,  all  good  ones,  and 
none  inferior.  Fi'om  a  selfish  point  of  view,  he  had  no  reason 
to  complain.  It  would  have  been  a;  very  different  story  had 
the  two  hundred  cattle  all  been  inferior. 

In  the  debates  it  was  proposed  ^  that,  as  the  cause  of  the 
change  in  the  relative  values  of  gold  and  silver  was  the  in- 
creased product  of  gold,  the  proper  remedy  should  be  to  in- 
crease the  quantity  of  gold  in  the  gold  coins.  This  was  ex- 
actly the  kind  of  treatment  which  should  have  been  adopted 
in  regard  to  silver  in  1834,  and  it  seems  quite  reasonable  that 
this  should  have  been  the  only  true  and  just  policy  in  1853. 
Certainly  it  was,  if  it  was  intended  to  bring  the  Mint  ratio  into 
accord  with  the  market  ratio,  and  try  again  the  experiment 
of  a  double  standard.  But  this  was  exactly  what  Congress 
chose  to  abandon.  There  was  no  discussion  as  to  how  a  re- 
adjustment of  the  ratio  between  the  two  metals  might  be 
reached,  for  it  was  ah'eady  decided  that  only  one  metal  was  to 
be  retained.  This  decision,  consequently,  carried  us  to  a  point 
where  a  ratio  between  the  two  metals  was  not  of  the  slightest 
concern.  And  so  it  remained.  The  United  States  had  no 
thought  about  the  -ratios  between  gold  and  silver  thereafter 
until  the  extraordinary  fall  in  the  value  of  silver  in  1876. 
The  policy  of  the  United  States  in  retaining  gold,  once  that 
it  was  in  circulation,  was  only  doing  a  little  earlier  what 
France  did  in  later  years.  When  the  cheapened  gold,  after 
1850,  had  filled  the  channels  of  circulation  in  France,  and 
had  driven  out  silver,  France  made  no  objections ;  but  when 
a  subsequent  change  in  silver  tended  to  drive  out  the  gold, 
France  quietly  held  on  to  her  gold.  The  United  States,  as 
well  as  France,  again  showed  the  unconscious  preference  for 
gold  of  which  Hamilton  spoke  in  1792. 

>  By  Mr.  Jones  (Tennessee). 


41? 


82  THE   UNITED   STATES,   1792-1873. 

§  4.  In  the  provisions  of  the  act  ^  of  1853  nothing  what' 
ever  vras  said  as  to  the  silver  dollar-piece.  It  had  entirely 
disappeared  from  circulation  years  before,  and  acquiescence 
in  its  absence  was  everywhere  found,  ^o  attempt  whatever 
was  thereafter  made  to  change  the  legal  ratio,  in  order  that 
both  metals  might  again  be  brought  into  concurrent  circula- 
tion. Having  enough  gold,  the  country  did  not  care  for  sil- 
ver. At  the  existing  and  only  nominal  Mint  ratio  of  1  :  16, 
the  silver  dollar  could  not  circulate,  and  no  attempt  was  made 
in  the  act  to  bring  it  into  circulation.  It  is,  therefore,  to 
be  kept  distinctly  in  mind  that  in  1853  the  actual  use  of 
silver  as  an  unlimited  legal  tender  equally  with  gold  was 
decisively  abandoned.  Under  any  conditions  then  existing 
a  double  standard  was  publicly,  admitted  to  be  hopeless. 
The  main  animus  of  the  act,  therefore,  is  to  be  found  in  what 
is  not  included  in  it,  that  is,  in  the  omission  to  insert  any 
provision  which  would  bring  the  silver  dollar  again  into  cir- 
culation. 

As  the  act  ^ands  on  the  statute-books,  it  is  practically 
nothing  more  than  a  regulation  of  the  subsidiary  silver  coin- 
age,^ and  its  study  is  but  a  lesson  in  the  proper  principles 
which  should  regulate  that  part  of  a  metallic  currency.  Hith- 
erto 100  cents  of  fractional  silver  coin  had  contained  371 1- 
grains  of  pure  silver ;  arid,  as  has  been  seen,  whenever  any- 
thing happened  to  drive  out  the  silver  dollar-piece,  the  sub- 
sidiary coins  disappeared  equally  with  the  dollar.  The  recog- 
nition of  this  fact  led  to  the  adoj^tion  of  the  first  correct  rule 
for  such  money.  The  act  reduced  the  number  of  grains  of 
pure  silver  in  100  cents  from  371*25  to  345-6  (the  standard 
weight  being  changed  from  412|-  to  384  grains),  equivalent  to 
a  reduction  of  6*91  per  cent  from  the  former  basis.    This  was 

*  For  the  act,  see  Appendix  III. 

*  "  The  main  object  of  the  bill  is  to  supply  small  silver  change,  half-dollars, 
quarter-dollars,  dimes,  and  half-dimes.  .  .  .  The  bill  does  not  propose  to  change 
the  value  of  the  gold  currency ;  it  does  not  propose  to  disturb  the  standard  of 
value  now  in  existence  throughout  the  country.  Gold  is  the  only  standard  of 
value  by  which  all  property  is  now  measured ;  it  is  virtually  the  only  currency 
of  the  country." — Skelton  (New  Jersey),  "Congressional  Globe,"  vol.  xxvi,  p.  629. 


THE   GOLD   DISCOVERIES   AND   THE   ACT   OF   1853.  83 

more  than  the  difference  between  the  vahie  of  the  gold  dollar 
and  the  silver  dollar  (which  was  worth  about  104  cents  in 
gold).  In  short,  it  was  intended^  to  reduce  silver  to  the 
position  of  a  subsidiary  metal.  The  reasan  for  the  reduc- 
tion of  weight,  so  that  100  cents  of  the  small  coins  should  be 
worth  even  less  than  the  value  of  the  gold  dollar,  is  sub- 
stantiated bj  the  experience  of  many  countries.  It  protects 
the  subsidiary  coin  from  disturbance,  even  if  changes  in  the 
relative  values  of  gold  and  silver  drive  out  one  or  the  other 
metal  which  is  coined  in  larger  pieces.  There  were  only^ 
34:5'6  grains  of  pure  silver  in  100  cents  of  this  coin ;  a  dol- 
lar of  gold  (23-2  grains)  would  buy  357;^  grains  of  silver 
bullion  (at  a  market  ratio  of  1 :  154).  If  a  person  should 
melt  the  new  silver  coins  (3-15-6),  he  would  fall  considerably 
short  of  having  enough  (357-|-)  to  buy  a  gold  dollar ;  and, 
there  being  no  profit,  there  would  be  no  motive  in  melting 
the  silver,  or  withdrawiiig  them  from  circulation.  The  first 
step,  therefore,  was  gained  by  lowering  their  weight  so  that 
the  market  value  of  the  pure  silver  in  the  subsidiary  coins 
was  worth  less  than  the  gold  dollar.^  The  silver  was  given  a 
face  value  in  that  form  greater  than  as  bullion,  and  there 
could  be  no  reason  to  withdraw  them  from  use. 

Far  from  there  being  any  fear  of  their  disappearance,  the 
next  question  was,  how  to  prevent  silver  from  flowing  to  the 
Mint  and  seeking  the  form  in  which  it  would  be  more  highly 
rated  than  as  bullion.  In  fact,  if  the  weight  of  the  subsidiary 
coinage  were  too  far  reduced,  it  would  offer  a  premium  to  coun- 
terfeiters, even  if  as  much  silver  were  used  in  the  false,  as  in 
the  United  States,  coin.    But  the  second  principle  to  be  ob- 

*  "  We  propose,  so  far  as  these  coins  are  concerned,  to  make  the  silver  sub- 
servient to  the  gold  coin  of  the  country.  .  .  .  We  mean  to  make  the  gold  the 
standard  coin,  and  to  make  these  new  silver  coins  applicable  and  convenient,  not 
for  large  but  for  small  transactions." — Dunham,  ibid.,  p.  190.  The  only  silver 
coins  in  circulation  were  three-cent  pieces  and  Spanish  coins  ("lips,"  12^-cent 
pieces,  and  quarters)  :  100  cents  of  the  former  contained  only  83^  cents  of  in- 
trinsic value  ;  and  the  latter  were  so  abraded  that  they  contained  intrinsically 
from  6  per  cent  to  20  per  cent  of  silver  below  their  nominal  or  face  value. 

'  I  can  now  speak  of  the  gold  dollar,  since  the  Mint  began  to  coin  it  in  1849. 


34  THE  UNITED  STATES,   1792-1873. 

served  prevented  too  great  a  quantity  of  silver  from  flowing  to 
the  Mint.  This  was  the  withdrawal  of  "  free  coinage  "  of  sub- 
sidiary currency,  and  a  limitation  of  the  supply  by  leaving  its 
amount  to  the  discretion  of  the  Secretary  of  the  Treasury.^ 
The  limitation  of  the  supply  to  the  amount  actually  needed 
for  the  use  of  the  public  would  keep  subsidiary  coins  current 
at  their  face  value  ;  because  of  the  necessity  of  having  such 
pieces  for  small  transactions.  Of  course,  the  complete  theory 
demands  that  the  Government  should  redeem  them  at  their 
tale  value,  in  order  to  prevent  redundancy ;  but  this  was  not 
carried  out  in  the  act  of  1853.  These  coins  could  be  pur- 
chased ^  only  from  the  Mint,  and  naturally,  with  gold,  at  their 
face  value  ;  they  would,  therefore,  get  into  circulation  at  first 
only  at  par.  Consequently,  no  more  would  get  out  than 
those  who  offered  a  full  gold  value  for  them  believed  were 
needed,  or  no  more  than  they  could  pass  at  their  face  value. 
In  the  original  bill,  as  proposed  by  Mr.  Dunham's  committee, 
it  was  intended  to  make  these  coins  receivable  for  debts  due 
to  the  Government  of  the  United  States.  This,  of  course, 
was  a  partial  means  of  redemption ;  but  it  was  not  ^  then 
adopted  by  Congress.      In  practice,  however,  such  a  pro- 

•  "  Sec.  5.  That  no  deposits  for  coinage  into  the  half-dollar  [etc.]  shall  here- 
after be  received,  other  than  those  made  by  the  Treasurer  of  the  Mint,  as  herein 
authorized,  and  upon  account  of  the  United  States." 

'■'  Strangely  enough,  this  law  was  evaded  in  actual  practice.  "  All  other  gov- 
ernments pay  the  expense  of  minting  by  the  difference  between  the  intrinsic 
value  of  subsidiary  coins  and  the  value  at  which  they  circulate,  and  at  which  the 
government  redeems  them.  And  such  was  the  law  in  this  country  until,  by  a  ruling 
of  Mr.  Guthrie  when  he  was  Secretary  of  the  Treasury,  the  Mint  was  ordered  to 
receive  silver  from  private  individuals  and  coin  it." — Mr.  Kelley,  "  Congressional 
Globe,"  Part  III,  2d  session,  41st  Congress,  p.  2311.  In  1870,  John  Jay  Knox, 
in  his  Report  accompanying  the  bill  which  became  the  act  of  1873,  said:  "The 
practice  at  the  Mint  for  many  years  [written'1870]  has  been  to  purchase  all 
silver  bullion  offered  at  about  $1.22ii-  per  ounce,  which  is  above  the  market 
price,  paying  therefor  in  silver  coin.  .  .  .  The  effect  of  the  Mint  practice  has 
been  to  put  in  circulation  silver  coins,  without  regard  to  the  amount  required 
for  purposes  of  '  change,'  creating  a  discount  upon  silver  coin." — "  Sen.  Misc. 
Doc,  No.  132,"  2d  session,  41st  Congress,  p.  10, 

2  June  9,  1879,  however,  an  act  was  passed  (see  Appendix  III)  redeeming 
subsidiary  silver  coins  in  suras  of  twenty  dollars. 


THE  GOLD  DISCOVERIES  AND   THE  ACT   OF   1853.  85 

vision  has  not  proved  necessai'y  in  order  to  keep  the  coins 
at  par.  Ahnost  the  only  serious  opposition  to  the  bill  was 
made  by  Andrew  Johnson,  of  Tennessee,  who  seemed  to  be 
unable  to  grasp  the  foregoing  principle  :  ^ 

"  Congress  can  not  regulate  the  value  of  the  coin.  ...  If 
we  can,  then,  by  law,  reduce  the  present  standard  seven  per 
cent,  and  make  the  value  of  the  reduced  standard  equal  to  the 
other,  I  ask  the  House  and  the  country  if  the  philosopher's 
stone  has  not  been  discovered  ?  .  .  .  The  commercial  world 
will  take  the  coins  for  what  they  are  intrinsically  worth,  and 
not  for  what  the  legal  stamp  represents  them  to  be  worth."  ^ 

The  third  principle  applicable  to  a  system  of  subsidiary 
coinage,  and  which  was  followed  in  the  act  of  1853,  was  that 
which  limited  its  legal-tender  power  to  a  small  sum.  The  dif- 
ference between  the  intrinsic  and  face  value,  if  there  were 
free  coinage,  would  enable  a  large  payment  to  be  made  in  a 
very  inconvenient  form  by  means  of  large  sums  of  small 
coins.  This,  however,  could  be  avoided  by  such  a  provision 
as  was  included  in  this  act,  which  limited  the  amount  of  sub- 
sidiary coins  to  be  oSered  in  payment  of  debts  to  a  sum  not 
exceeding  five  dollars.^  But  this  difficulty  was  also  checked 
by  the  absence  of  free  coinage.  Even  in  this  case,  however, 
the  limitation  of  legal-tender  power  would  prevent  a  pos- 
sible annoyance  in  business  transactions. 

The  bill,  which  originated  in  the  Senate,  passed  the  House 
without  any  practical  alteration.  A  'motion  to  lay  the  bill  on 
the  table  was  twice  lost,  by  votes  of  54  to  109,  and  of  65  to  111. 
It  was  passed  in  the  House  with  94  ayes,  the  noes  not  counted.* 

•  He  was  afterward  President  of  the  United  States. 

'  "  Congressional  Globe,"  vol.  xxvi,  2d  session,  32d  Congress,  p.  476.  He  did 
not  believe,  moreover,  that  the  great  production  of  gold  had  lowered  its  value  :  "  I 
assume  here,  and  I  defy  successful  refutation  of  it,  that  the  quantity  of  gold  may 
be  increased  upon  that  of  silver  without  changing  the  relative  commercial  value 
of  the  metals." — Ibid.,  p.  490.  He  also  said  :  "  So  far  as  coin  is  concerned,  the 
changing  of  our  standard  of  gold  and  silver  has  no  more  effect  upon  the  gold  and 
silver  coinage  of  the  United  States  than  a  change  in  the  standard  of  weights  and 
measures  would  have  upon  the  price  of  our  cotton  or  wheat." — Ibid.,  p.  491. 

^  June  9,  1S79,  the  amount  to  which  silver  coins  in  denominations  below  one 
dollar  are  a  legal  tender  was  raised  to  ten  dollars. 

*  "  Congressional  Globe,"  ibid.,  pp.  629,  630. 


CHAPTER  YL 

THE    GOLD    STAKDAKD,    ISoS-lSVS. 

§  1.  At  no  time  after  the  act  of  1853  until  the  Civil 
War  was  the  silver  dollar  of  412^  grains  equal  to  less  than 
103  or  104  cents  of  our  gold  coins,  and,  consequently,  it  was 
never  seen  in  circulation.  The  country  had  willingly  ac- 
quiesced in  the  practical  adoption  of  the  single  gold  stand- 
ard, and  so  well  did  the  situation  satisfy  all  demands  that  the 
question  of  gold  and  silver  dropped  out  of  the  public  mind. 
The  subsidiary  coinage  of  silver  introduced  by  the  act  of 
1853  served  its  purpose  admirably.  With  gold  as  the  medi- 
nm  of  exchange  for  large  payments,  and  an  overvalued  silver 
coinage  for  small  payments,  the  business  interests  of  the 
country  were  fully  content,  and  no  trouble  need  have  arisen 
to  this  day  from  any  disturbances  in  our  system  of  metallic 
currency  had  we  been  saved  from  the  evils  of  our  Civil  War. 
Until  the  passage  of  the  Legal-Tender  Act  early  in  1862 
(specie  payments  were  suspended  December  31,  1861)  our 
currency  continued  to  be  what  it  was  intended  it  should  be 
in  1853 — a  gold  currency.  Paper  money,  issued  by  the  State 
banks,  was,  of  course,  in  circulation ;  but  I  do  not  propose 
here  to  include  the  history  of  paper  issues.  Paper  money 
acts  to  drive  out  either  metal  which  is  in  use ;  and  so  its 
existence  does  not  alter  conclusions  which  are  concerned  only 
with  the  two  metals.  We  can  say,  without  hesitation,  that 
our  coinage  system  from  1853  to  the  Civil  War  worked  ad- 
mirably. There  were  evidently  no  longings  to  use  the  silver 
dollar  piece  when  it  was  worth  3  or  4  per  cent  premium. 


THE   GOLD  STAXDARD,    1853-1873.  87 

§  2.  The  act  of  February  25,  1862,  issued  tlie  first  install- 
ment of  United  States  legal-tender  notes  to  the  amount  of 
$150,000,000.  A  similar  amount  was  authorized  by  a  second 
act  passed  July  11,  1862,  but  which  was  going  through  the 
preliminary  stages  of  enactment  in  June.  The  result  of  the 
depreciation  of  the  paper  money  which  became  manifest  by 
a  premium  on  gold  in  June  to  the  extent  of  5  per  cent,  and 
in  July  of  20  per  cent,  naturally  brought  Gresham's  law  into 
operation,  by  which  the  cheaper  paper  was  substituted  for 
the  more  valuable  gold.  Gold  disappeared  before  the  depre- 
ciating paper,  and  it  was  not  until  January  1,  1879,  that  it 
again  appeared. 

The  displacing  paper  did  even  more  than  this.  It  drove 
out  the  subsidiary  coinage  in  1862.  As  early  as  July  2d  the 
newspaj^ers  noted  the  disappearance  of  small  coin,  and  its 
accompanying  inconveniences.  But  in  Congress  there  was 
very  little  conception  of  the  causes  at  work.  While  the  sec- 
ond legal-tender  bill  was  under  discussion  in  June,  members 
seemed  to  be  utterly  unconscious  of  what  was  going  on.  On 
June  17th  an  amendment  was  introduced  into  Section  1  of 
the  bill  in  regard  to  the  small  denominations  of  paper  to  this 
effect : 

"  Provided,  That  no  note  shall  be  issued  for  the  fractional 
part  of  a  dollar,  and  not  more  than  thirty-five  millions  shall  be 
of  lower  denominations  than  five  dollars." 

This  measure  was  evidently  intended  to  protect  the  small 
coins  in  circulation.  It  was  believed,  no  doubt,  that,  if  paper 
of  small  denominations  were  not  issued,  subsidiary  coins 
would  remain  in  circulation.  The  discussion  and  probable 
passage  of  an  act  authorizing  this  second  issue  of  paper  so 
depreciated  its  value  that,  before  the  five-dollar  notes  could 
have  been  issued  from  the  printing-press,  and  even  before 
the  passage  of  this  bill,  the  disappearance  of  the  small  coins 
was  remarked  upon  (July  2d).  This  showed  distinctly  that 
ten-dollar  notes,  if  depreciated,  could  drive  out  silver  coins  of 
denominations  less  than  one  dollar.    There  was,  in  truth,  only 


88  THE  UNITED    STATES,   1792-18'73. 

a  greater  profit  in  dealing  witii  larger  sums.  A  large  quan- 
tity of  silver  coins  collected  together  and  sold  for  depreciated 
legal-tender  paper  of  large  denominations  gave  the  same 
proportional  profit  as  if  small  notes  had  been  used  in  the 
process.^ 

The  subsidiary  silver,  containing  345 -6  grains  of  pure 
metal,  circulated  at  its  face  value  in  exchange  for  gold  coins ; 
but,  if  a  412J-grain  dollar,  containing  371'25  grains  of  pure 
silver,  were  counted  as  par,  34r5"6  grains  of  subsidiary  coinage 
would  be  worth  relatively,  so  far  as  regards  the  pure  silver 
it  contained,  only  93*09  cents  (although  its  legal  value  in  small 
payments  was  100  cents).  The  market  value  of  a  dollar  con- 
taining 371*25  grains,  in  1862,  however,  was  104:'16  cents  of 
our  gold  coins.  But,  inasmuch  as  the  subsidiary  coins  would 
be  melted,  or  exported,  only  on  estimates  of  their  intrinsic 
value,  the  market  price  of  345*6  grains  of  silver  would  be 
96-96  cents  of  our  gold  coins.  As  soon,  therefore,  as  the  paper 
money  depreciated  below  96*96  cents,  as 


100— 


96-9 


84-7- 


Gold  coins. 


compared  with  our  gold  coins,  the  move- 
ment of  subsidiary  silver  out  of  circulation 
would  begin.    The  operation  can  be  easily 
Silver  smau  coins.      ^^^^  by  the  adjoined  diagram.     As  soon 

as  the  United  States  notes  depreciated  be- 
low 100,  or  par,  there  would  be  a  profit  in 
withdrawing  our  gold  coins  from  use,  ac- 
cording to  Gresham's  law.  And  when  the 
depreciation  had  reached  a  point  below 
United  states  notes.  90-96,  the  silver  coins  must  of  necessity 
disappear.  By  June  1,  1862,  the  premi- 
um on  gold  was  5  per  cent,  which  showed 
a  depreciation  of  the  United  States  notes  to  95*23  cents  in  a 
dollar ;  by  the  1st  of  July  the  premium  on  gold  was  about  18 
per  cent,  showing  a  depreciation  to  84*7  cents  in  a  dollar. 
In  short,  the  subsidiary  coins  must  have  been  withdrawn 

*  There  had  been  good  authority  for  the  belief  that  coin  would  continue  to 
circulate  provided  no  paper  of  a  corresponding  denomination  were  issued.  See 
J.  S.  Mill's  "  Political  Economy  "  (Laughlin's  edition),  p.  348. 


THE  GOLD  STANDARD,  ISSS-ISTS.  89 

very  soon  after  any  effect  on  the  gold  coins  was  apparent. 
The  paper  money  at  Si'T  cents  would  very  rapidly  dislodge 
both  kinds  of  coins. 

Although,  on  the  17th  of  June,  in  the  second  legal-ten- 
der act,  any  paper  issues  of  denominations  less  than  a  dollar 
had  been  forbidden,  Congress  was  forced,  by  the  events  we 
have  just  described,  to  pass  a  bill  authorizing  the  issue  of  a 
paper  fractional  currency  on  July  17,  1862.  The  absence  of 
small  silver  had  brought  into  existence  tokens,  tickets,  checks, 
and  substitutes  of  every  description,  issued  by  merchants  and 
shopkeepers ;  and  Congress  was  obliged  hastily  to  author- 
ize a  currency,  originally  based  on  the  likeness  of  postage- 
stamps,  but  which  finally  resulted  in  simple  exercise  of  the 
function  of  note-issues  for  small  denominations.  Congress 
was  unwilling  to  admit  the  necessity  for  such  issues  of  paper, 
and  the  first  act  was  entitled  "An  Act  to  authorize  pay- 
ments in  stamps."  ^ 

§  3.  The  paper-money  p'eriod  continued  until  the  re- 
sumption of  specie  payments,  January  1,  1879.  Meanwhile 
no  gold  was  in  circulation.  The  fractional  paper  notes  con- 
tinued in  use  in  spite  of  an  ill-judged  and  ridiculous  attempt 
of  the  Secretary  ^  of  the  Treasury  to  redeem  them,  with  but 
a  small  reserve  of  silver,  in  October,  1873.  This  incident  is 
an  evidence  of  extraordinary  ignorance  in  a  finance  minister. 
Yery  soon  after  the  commercial  crisis  of  September,  1873, 
the  exceptional  condition  of  the  exchanges  and  the  arrival  of 
gold  caused  a  fall  in  the  premium  on  gold  in  October  from 
11  to  6  per  cent.  But  with  a  gold  dollar  worth  106  cents 
in  paper,  the  paper  was  worth  only  about  94  cents  in  gold, 
while,  as  it  will  be  remembered,  the  345*6  grains  of  silver  in 
the  subsidiary  coinage  were  equivalent  to  96*9  cents  in  gold.^ 
ISfot  until  gold  had  fallen  to  104,  at  least,  could  it  be  hoped 

'  Sec.  12,  "Statutes  at  Large,"  592.  The  twenty-five  cent  note, for  example, 
contained  a  copy  of  five  five-cent  postace-stamps.  '  Secretary  Richardson. 

*  Cf.  also  a  broker's  table  giving  purchasing  prices  of  silver  coins  in  paper 
for  exportation,  in  the  "  Financial  and  Commercial  Chronicle,"  November  1, 
1873,  p.  590. 


90  THE  UNITED   STATES,   1792-1873. 

that  silver  would  remain  in  circulation.  But  Secretary  Rich- 
ardson announced  that  silver  had  fallen  so  low  that  he  pro- 
posed to  resume  payments  in  that  metal.  He  had  in  the 
Treasury  not  more  than  lialf  a  million  ^  in  silver ;  gold  was 
selling  at  not  less  than  106,  and  a  profit  still  existed  in  ex- 
changing paper  for  subsidiary  silver.  On  the  27th  of  Octo- 
ber, 1873,  "  Secretary  E-ichardson  issued  a  circular  letter  to 
the  several  sub-treasury  officers,  directing  them  to  pay  out 
silver  coin  to  public  creditors,  should  they  desire  it,  in  sums 
not  to  exceed  five  dollars  in  any  one  payment."  ^  In  prac- 
tice, the  silver  was  paid  out  in  sums  of  a  few  hundred  dol- 
lars a  day,  for,  of  course,  every  creditor  demanded  his  share 
of  silver.  The  silver  was  not  given  in  exchange  for  j)aper 
currency.  The  silver,  when  paid  out,  disappeared,  and  would 
have  done  so  had  the  Secretary  issued  millions,  instead  of 
hundreds,  of  dollars  of  it.^ 

While  discussing  the  subject  of  subsidiary  coinage,  it 
may  be  best  to  anticipate  our  story  slightly  and  narrate  here 
the  means  by  which  resumption  of  silver  payments  was 
finally  achieved  in  1877-1878.  The  Resumption  Act,  passed 
January  14,  1875,  enacted  (Sec.  1): 

"  That  the  Secretary  of  the  Treasury  is  hereby  authorized 
and  required,  as  rapidly  as  practicable,  to  cause  to  be  coined  at 
the  mints  of  the  United  States  silver  coins  of  the  denomina- 
tions of  ten,  twenty-five,  and  fifty  cents,  of  standard  value,  and 
to  issue  thera  in  redemption  of  an  equal  number  and  amount  of 
fractional  currency  of  similar  denominations  ;  or,  at  his  discre- 
tion, he  may  issue  such  silver  coins  through  the  mints,  the  sub- 
treasuries,  public  depositaries,  and  post-offices  of  the  United 
States  ;  and  upon  such  issue  he  is  hereby  authorized  and  re- 
quired to  redeem  an  equal  amount  of  such  fractional  currency 
until  the  whole  amount  of  such  fractional  currency  outstand- 
ing shall  be  redeemed." 

^N'ot  until  1877,  however,  did  the  premium  on  gold  fall 
so  low  that,  by  the  corresponding  rise  in  the  value  of  paper,  it 

»  Upton,  "  Money  in  Politics,"  p.  146,  says  he  had  "  only  a  few  thousands." 
2  Upton,  ibid.,  p.  146. 

*  The  Secretary  said  he  could  have  resumed  silver  payments  if  .the  newspa- 
pers had  not  discovered  his  plan  and  discussed  it ! 


THE  GOLD  STANDARD,   1853-18Y3. 


91 


warranted  an  attempt  at  resumption  of  silver  payments.  The 
following  table  ^  will  show  the  value  of  a  paper  dollar  in  gold 
since  1865  : 

Secretary  Bristow  felt  some  doubts  ^ 
as  to  his  authority  to  pay  out  silver 
coins  for  notes  under  the  provision  of 
the  Resumption  Act  just  quoted,  and 
a  subsequent  bill  ^  was  passed  April  17, 
1876.  The  amount  of  fractional  cur- 
rency outstanding  was  about  $4:2,000,- 
000,  and  the  pressure  for  redemption 
at  first  was  very  strong.*  All  but 
$16,000,000  of  the  fractional  paper 
notes  had  at  once  come  in  for  redemp- 
tion ;  but  since  then  about  $1,000,000 
more  have  been  redeemed,  leaving  $15,- 
000,000  yet  outstanding,  or,  more  prob- 
ably, destroyed.  After  the  first  severe  pressure  due  to  the 
redemption  of  the  fractional  paper-money  had  ceased,  the 
demand  for  silver  coins  at  the  Mint  still  continued  in  order 
to  satisfy  the  needs  of  trade ;  whereon  Congress  permitted 
an  additional  issue  of  $10,000,000  in  exchange  for  legal- 
tender  notes.^ 


Tear  ending 
June  30th. 

Coin  value  of 
one  dollar 

of  paper. 

1865 

•71 

1866 

•66 

1867 

•71 

1868 

•70 

1869 

•73 

1870 

•85 

1871 

•89 

1872 

•87i 

1873 

•86i 

1874 

•91 

1875 

•87 

1876 

•89 

1877 

•95 

1878 

•99J 

Jan.  1,1879 

1-00 

'  Taken  from  Upton,  "  Money  in  Politics,"  p.  145. 

*  Upton,  ibid.,  p.  148.  ^  See  Appendix  III,  A,  ix. 

*  Secretary  Bristow  sold  $17,594,150  of  6-per-cent  bonds  to  aid  in  purchas- 
ing  the  silver  bullion  for  the  subsidiary  coinage,  which  was  subsequently  met 
out  of  the  surplus  revenue. 

»  See  Appendix  III,  A,  x,  July  22,  1876. 


CHAPTER  YII. 

THE   DEMONETIZATION   OF    SILVER. 

§  1.  In  1873  we  find  a  simple  legal  recognition  of  that 
wbicli  had  been  the  immediate  result  of  the  act  of  1853,  and 
which  had  been  an  admitted  fact  in  the  history  of  our  coin- 
age during  the  preceding  twenty  years.  In  1853  it  had  been 
agreed  to  accept  the  situation  by  which  we  had  come  to  have 
gold  for  large  payments,  and  to  relegate  silver  to  a  limited 
service  in  the  subsidiary  coins.  The  act  of  1873,  however, 
dropped  the  dollar  piece  out  of  the  list  of  silver  coins.  In 
discontinuing  the  coinage  of  the  silver  dollar,  the  act  of  1873 
thereby  simply  recognized  a  fact  which  had  been  obvious  to 
everybody  since  1849.  It  did  not  introduce  anything  new, 
or  begin  a  new  policy.  Whatever  is  to  be  said  about  the 
demonetization  of  silver  as  a  fact  must  center  in  the  act  of 
1853.  Silver  was  not  driven  out  of  circulation  by  the  act 
of  1873,  which  omitted  the  dollar  of  412|-  gi-ains,  since  it 
had  not  been  in  circulation  for  more  than  twenty-five  years. 
In  1853  Congress  advisedly  continued  in  motion  the  ma- 
chinery which  kept  the  silver  dollar  out  of  circulation,  and, 
as  we  have  seen,  avowed  its  intention  to  create  a  single  gold 
standard.  This,  then,  was  the  act  which  really  excluded 
silver  dollars  from  our  currency.  A  vast  deal  of  rhetoric 
has  been  wasted  on  the  act  of  1873,  but  its  importance  is 
greatly  overrated.  A  law  which  merely  recognized  existing 
conditions  can  not  be  compared  with  the  law  which  had  for 
its  object  to  establish  those  conditions ;  and  this  states  the 
relative  force  of  the  act  of  1853  and  that  of  1873. 


THE   DEMONETIZATION   OF  SILVER.  93 

The  act  of  February  12,  1873,^  is  known  as  the  act  which 
demonetized  the  silver  dollar.  Important  consequences  have 
been  attached  to  it,  and  it  has  even  been  absurdly  charged  that 
the  law  was  the  cause  ^  of  the  commercial  crisis  of  September, 
1873.  As  if  a  law  which  made  no  changes  in  the  actual  me- 
tallic standard  in  use,  and  which  had  been  in  use  thus  for 
more  than  twenty  years,  had  produced  a  financial  disaster  in 
seven  months  !  To  any  one  who  knows  of  the  influence  of 
credit  and  speculation,  or  who  has  followed  the  course  of  our 
foreign  trade  since  the  Civil  War,  such  a  theory  is  too  absurd 
to  receive  more  than  passing  mention.  To  the  year  1873  there 
had  been  coined  of  412|^-grain  dollars  for  purposes  of  circu- 
lation   only  $1,439,457,  and  these  were  coined  before  1806. 

But  while  the  act  of  1873  had  little  importance  in 
changing  existing  conditions,  it  had  an  influence  of  a  kind 
which  at  the  present  time  can  scarcely  be  overestimated. 
We  are  now,  in  the  course  of  our  story,  approaching  the 
year  1876,  in  which  occurred  the  phenomenal  fall  in  the 
value  of  silver.  Had  the  demonetization  of  the  silver  dollar 
not  been  accomplished  in  1873  and  1874,  we  should  have 
found  ourselves  in  1876  with  a  single  silver  standard,  and 
the  resumption  of  specie  payments  on  January  1, 1879,  would 
have  been  in  silver,  not  in  gold ;  and  15  per  cent  of  all  our 
contracts  and  existing  obligations  would  have  been  repudi- 
ated. The  act  of  1873  was  a  piece  of  good  fortune,  which 
saved  our  financial  credit  and  protected  the  honor  of  the 
State.  It  is  a  work  of  legislation  for  which  we  can  not  now 
be  too  thankful. 

§  2.  It  is,  moreover,  possible  that  the  silver  dollar  was  not 
"  demonetized  "  in  1873,  in  spite  of  the  prevailing  impres- 
sion to  that  effect.  The  legal-tender  power  of  the  silver 
dollar  was  not  taken  away  by  this  measure.  The  coinage 
laws  had  not  been  revised  since  1837,  and  in  the  act  of  1873 


'  See  Appendix  III. 

'  "  Report  of  the  United  States  Silver  Commission,"  1877,  vol.  i,  p.  125. 

'  Upton,  "  Money  in  Politics,"  p.  201. 


94  THE  UNITED   STATES,  1792-1873. 

occasion  was  taken  to  drop  out  the  silver  dollar  from  tlie  list 
of  coins  which  were  thereafter  to  be  issued  from  the  Mint.^ 

"  Sec.  15.  That  the  silver  coins  of  the  United  States  shall  be 
a  trade-dollar  ;  a  half-dollar,  or  fifty-cent  piece  ;  a  quarter-dollar, 
or  twenty-five-cent  piece  ;  a  dime,  or  ten-cent  piece  ;  and  the 
weight  of  the  trade-dollar  shall  be  420  grains  troy  ;  the  weight 
of  the  half-dollar  shall  be  12  grams  (grammes)  and  one  half  of 
a  gram  (gramme)  ;  the  quarter-dollar  and  the  dime  shall  be, 
respectively,  one  half  and  one  fifth  of  the  weight  of  said  half- 
dollar  ;  and  said  coins  shall  be  a  legal  tender  at  their  nominal 
value  for  any  amount  not  exceeding  five  dollars  in  any  one 
■payment. 

"  Sec.  17.  That  no  coins,  either  of  gold,  silver,  or  minor  coin- 
age, shall  hereafter  be  issued  from  the  Mint  other  than  those  of 
the  denominations,  standards,  and  weights  herein  set  forth." 

It  will  be  noticed  that  the  dollar  of  412^  grains  is  omitted 
from  the  list  of  silver  coins  which  were  in  the  future  to  be  is- 
sued by  the  Mint,  and  of  this  list  it  is  said  that  they  shall 
be  a  legal  tender  to  the  amount  of  five  dollars ;  but  nothing 
is  said  which  takes  away  the  legal-tender  quality  of  a  coin 
already  in  existence,  but  of  which  no  mention  was  made. 
Whatever  silver  dollars  there  were  in  existence  were  still  a 
legal  tender  to  any  amount  after  the  act  was  passed,  although 
no  more  could  be  coined.  The  silver  dollar,  however,  was 
demonetized ;  but  not  by  the  act  of  1873.  The  revision  of 
the  Statutes  of  the  United  States,  previously  authorized,  was 
adopted  as  the  law  of  the  land  in  June,  1874.  In  the  Re- 
vised Statutes  ^  the  legal-tender  power  of  all  silver  coins  is 
thus  limited : 

Act  of  June,  1874  :  "  §  3586.  The  silver  coins  of  the  United 
States  shall  be  a  legal  tender  at  their  nominal  value  for  any 
amount  not  exceeding  five  dollars  in  any  one  payment." 

This  statement,  it  will  be  noticed,  is  a  general  one,  and 
applies  to  any  silver  coins  of  the  United  States  whatever, 
while  the  act  of  1873  predicated  a  limited  legal-tender  power 
of  only  a  specified  list  of  silver  coins.  The  legal  enactment, 
therefore,  which  really  took  away  the  legal-tender  quality  of 

>  See  act  of  1873  in  Appendix  III,  See.  15  and  17.  ^  See  Appendix  III. 


THE  DEMOIIETIZATION  OF  SILVER.  95 

the  silver  dollar  of  412|^  grains,  was  passed  June  22,  1874. 
The  act  of  1873  only  discontinued  its  coinage ;  the  provision 
of  the  Revised  Statutes  took  away  its  debt-paying  power  for 
sums  beyond  live  dollars.^ 

The  act  of  1873  also  made  a  change  in  the  charge  for 
seigniorage.  Until  1853  the  expense  of  changing  bullion 
into  coin  was  borne  by  the  Government ;  but  the  act  of 
1853  inserted  a  charge  of  one  half  of  one  per  cent,  on  all 
but  subsidiary  silver  coins.  No  seigniorage,  of  course,  was 
charged  for  subsidiary  coins,  because  there  was  no  "free 
coinage"  of  them  by  individuals.  The  act  of  1873  now  re- 
duced the  charge  from  one  half  to  one  fifth  of  one  per  cent.^ 

§  3.  The  act  of  1873  has  been  the  subject  of  a  curious  con- 
troversy. After  the  fall  of  silver  in  1876,  and  the  subsequent 
rise  of  bimetallic  discussions,  severe  denunciations  of  the  act 
of  1873  were  heard.  It  was  asserted  that  the  demonetization 
of  silver  was  secretly  carried  out  without  any  knowledge  of 
it  by  the  general  public,  or  even  by  financial  experts.  In 
the  silver  discussion  of  1878  it  was  charged^  that  the  silver 

'  Cf .  Upton,  "  Money  in  Politics,"  p,  207.  This  matter  was  quite  thoroughly 
discussed  in  January,  1878,  in  the  debates  in  the  Senate.  See,  for  example,  the 
"  Globe,"  p.  262,  vol.  vii.  Part  I,  2d  session,  45th  Congress. 

*  The  charge  for  seigniorage,  however,  was  repealed  by  the  Resumption  Act 
in  1875  ;  so  that,  like  England,  the  United  States  now  makes  no  charge  for 
manufacturing  its  coin. 

^  The  following  examples,  out  of  many,  may  be  cited :  Senator  Hereford 
(West  Virginia)  charged  the  fraudulent  passage  of  the  act  of  1873,  on  May  27, 
1872,  on  the  House,  because  Mr.  Hooper,  in  charge  of  the  bill,  reported  a  sub- 
stitute, and  moved  to  suspend  the  rules  and  pass  the  substitute ;  and  because 
Mr.  Hooper  said,  in  answer  to  an  inquiry  concerning  coins  of  small  denomina- 
tion :  "  This  bill  makes  no  change  in  the  existing  law  ia  that  regard.  It  does 
not  require  the  recoinage  of  the  stnall  coins.''''  The  charge  is  made  that  the  sub- 
stitute was  not  read  before  it  was  passed. — "  Globe,"  vol.  vii.  Part  I,  2d  session, 
45th  Congress,  p.  205. 

Mr.  Bright  (Tennessee)  said  in  the  House :  "  It  was  passed  by  fraud  in  the 
House,  never  having  been  printed  in  advance,  being  a  substitute  for  the  printed 
bill ;  never  having  been  read  at  the  Clerk's  desk,  the  reading  having  been  dis- 
pensed with  by  an  impression  that  the  bill  made  no  material  alteration  in  the 
coinage  laws ;  it  was  passed  without  discussion,  debate  being  cut  off  by  operation 
of  the  previous  question.     It  was  passed,  to  my  certain  information,  under  such 


96  THE  UNITED  STATES,    1792-18'73. 

dollar  had  been  demonetized  surreptitiously  in  1873.  The 
probable  ground  for  this  belief  arose  from  the  form  of  the 
bill,  which,  as  we  have  seen,  made  a  list  of  the  silver  coins, 
and  from  this  list  simply  omitted  the  silver  dollar  without 
calling  attention  in  the  enactment  itseK  to  its  discontinu- 
ance. An  enactment,  however,  does  not  usually  describe 
what  has  been  omitted ;  its  affirmations  are  positive.  The 
discontinuance  of  the  silver  dollar,  moreover,  was  not  kept  a 
secret  during  the  time  of  more  than  two  years  when  the  bill 
was  before  Congress.  Mr.  "VV.  D.  Kelly,  chairman  of  the  Com- 
mittee of  Coinage,  Weights,  and  Measures  of  the  House,  and 
reported  the  bill  January  9,  1872,  in  the  following  words,^ 
with  the  recommendation  that  it  pass : 

"  It  was  referred  to  the  Committee  on  Coinage,  Weights, 
and  Measures,  and  received  as  careful  attention  as  I  have  ever 
known  a  committee  to  bestow  on  any  measure.  .  .  .  The  com- 
mittee proceeded  with  great  deliberation  to  go  over  the  bill, 
not  only  section  by  section,  but  line  by  line  and  word  by 
word."     [This  applied  to  the  previous  session.] 

"I  wish  to  ask  the  gentleman  who  has  just  spoken  if  he 
knows  of  any  government  in  the  world  which  makes  its  sub- 
sidiary coinage  of  full  value.  The  silver  coin  of  England  is 
10  per  cent  below  the  value  of  gold  coin,  and,  acting  under  the 
advice  of  the  experts  of  this  country  and  of  England  and  of 
France,  Japan  has  made  her  silver  coinage  within  the  last  year 
12  per  cent  below  the  value  of  gold  coin,  and  for  this  reason  : 
It  is  impossible  to  retain  the  double  standard.  The  values  of 
gold  and  silver  continually  fluctuate.  You  can  not  determine 
this  year  what  will  be  the  relative  values  of  gold  and  silver  next 
year.  They  were  15  to  la  short  time  ago  ;  they  are  16  to 
1  now." 

Par  from  having  been  accomplished  surreptitiously,  the 
discontinuance  of   the  silver  dollar  was  very  well  known 

circumstances  that  the  fraud  escaped  the  attention  of  some  of  the  most  watch- 
ful as  well  as  the  ablest  statesmen  in  Congress  at  the  time.  It  was  passed  near 
the  closing  days  of  the  session,  when,  in  the  bustle  and  precipitate  rush  of  busi- 
ness, it  was  most  favorable  for  the  concealment  of  fraud.  .  .  .  Ay,  sir,  it  was  a 
fraud  that  smells  to  heaven.  It  was  a  fraud  that  will  stink  in  the  nose  of  pos- 
terity, and  for  which  some  persons  must  give  account  in  the  day  of  retribution." 
— "  Globe,"  vol.  vii,  Part  I,  2d  session,  45th  Congress,  p.  584. 

'  "  Congressional  Globe,"  Part  I,  2d  session,  42d  Congress,  p.  322, 


THE   DEMONETIZATION  OF  SILVER.  97 

througli  the  attention  given  it  by  tlie  Secretary  of  the  Treas- 
ury in  his  reports  for  1870,  1871,  and  1872.  The  bil^  sub- 
stantially as  passed,  was  the  work  of  John  Jay  Knox,  and 
was  transmitted  by  Secretary  Boutwell  to  Senator  Sherman, 
chairman  of  the  Senate  Finance  Committee,  April  25,  1870  ; 
the  bill  was  sent  out  for  criticism  and  suggestions  to  no  less 
than  thirty  persons  familiar  with  the  Mint  and  with  coinage 
operations ;  it  was  printed  thirteen  times  by  order  of  Con- 
gress ;  it  was  considered  during  five  different  sessions  of  the 
Senate  and  House  ;  the  debates  on  the  bill  in  the  Senate  occu- 
py Q6,  and  in  the  House  78,  columns  of  the  "  Congressional 
Globe,"  and  it  was  not  finally  passed  until  February  12, 1873. 

1  It  is  to  be  remembered,  however,  that  the  bill  dealt  with  many  more  mat- 
ters, and  those  of  a  technical  nature,  than  the  omission  of  the  silver  dollar 
in  itself.  The  originator  of  the  bill,  Mr.  Knox,  thus  explains  in  his  report 
(p.  2)  how  it  was  prepared :  "  The  method  adopted  in  the  preparation  of  the 
bill  was  first  to  arrange  in  as  concise  a  form  as  possible  the  laws  now  in 
existCDce  upon  these  subjects  [Mint,  assay-offices,  and  coinage],  with  such 
additional  sections  and  suggestions  as  seemed  valuable.  Having  accomplished 
this,  the  bill,  as  thus  prepared,  was  printed  upon  paper  with  wide  margin, 
and  in  this  form  transmitted  to  the  different  mints  and  assay-offices,  to  the 
First  Comptroller,  the  Treasurer,  the  Solicitor,  the  First  Auditor,  and  to  such 
other  gentlemen  as  are  known  to  be  intelligent  upon  metallurgical  and  nu- 
mismatical  subjects,  with  the  request  that  the  printed  bill  should  be  re- 
turned, with  such  notes  and  suggestions  as  experience  and  education  should 
dictate.  In  this  way  the  views  of  more  than  thirty  gentlemen  who  are  con- 
versant with  the  manipulation  of  metals,  the  manufacture  of  coinage,  the  exe- 
cution of  the  present  laws  relative  thereto,  the  method  of  keeping  accounts 
and  of  making  returns  to  the  department,  have  been  obtained,  with  but  lit- 
tle expense  to  the  department  and  little  inconvenience  to  correspondents. 
Having  received  these  suggestions,  the  present  bill  has  been  framed,  and  is 
believed  to  comprise  within  the  compass  of  eight  or  ten  pages  of  the  Revised 
Statutes  every  important  provision  contained  in  more  than  sixty  different  ex- 
actments  upon  the  Mint,  assay-offices,  and  coinage  of  the  United  States,  which 
are  the  result  of  nearly  eighty  years  of  legislation  upon  these  subjects."  Mr. 
Knox's  report  accompanied  the  bill  to  Congress,  and  gives  a  clear  idea  of 
its  full  character,  with  comparative  tables  of  the  existing  and  proposed  coin- 
age.— "  Letter  of  the  Secretary  of  the  Treasury  to  the  Chairman  of  the  Com- 
mittee on  Finance,  communicating  a  report  of  John  Jay  Knox,  in  relation 
to  a  revision  of  the  laws  pertaining  to  the  Mint  and  coinage  of  the  United 
States,"  May  2,  1870;  "Sen.  Misc.  Doc.  No.  132,"  2d  session,  41st  Con- 
gress. 


98 


THE  UNITED  STATES,   1'792-18'73. 


The  following  table  ^  will  show  the  slow  process  by  which  the 
bill  finally  became  a  law : 


PEOCEEDmGS. 


Submitted  by  Secretary  of  Treasury 

Referred  to  Senate  Finance  Committee 

Five  hundred  copies  printed 

Submitted  to  House 

Reported,  amended,  and  ordered  printed 

Debated 

Passed,  by  vote  of  36-14 , 

Senate  bill  ordered  printed 

Bill  reported  with  substitute,  and  recommitted 

Original  bill  reintroduced  and  printed 

Reported  and  debated 

Recommitted 

Reported  back,  amended,  and  printed 

Debated 

Amended,  and  passed  by  vote  of  110-13 

Printed  in  Senate 

Reported,  amended,  and  printed 

Reported,  amended,  and  printed 

Passed  Senate 

Printed  with  amendments 

Conference  Committee  ^  appointed 

Became  a  law,  February  12,  1873 


Senate. 

Apr. 

25, 

1870 

Apr, 

28, 

1870 

May 

2, 

1870 

Dec. 

19, 

1870 

Jan. 

9, 

1871 

Jan. 

10, 

1871 

May 

29, 

1872 

Dec. 

16, 

1872 

Jan. 

7, 

1873 

Jan. 

n, 

1873 

House. 


June  25, 1870 


Jan.  13,  1871 
Feb.  25, 1871 
Mar.  9,  1871 
Jan.  9,  1872 
Jan.  10,  1872 
Feb.  13,  1872 
Apr.  9,  1872 
May  27,  1872 


Jan.  21,  1873 


Although  it  was  in  reality  a  codification  of  laws  relating 
to  all  questions  connected  with  details  of  the  Mint,  assay- 
offices,  and  coinage,  the  intention  of  the  bill  in  regard  to  the 
omission  of  the  silver  dollar  is  unmistakable.  In  the  original 
bill,  as  sent  out  by  Mr.  Knox  for  suggestions,  a  silver  dollar 
of  384  standard  grains  was  proposed,  or  one  on  the  basis  of  the 
existing  subsidiary  coinage.  In  this  provision  there  was  not 
only  no  intention  of  retaining  the  dollar  of  41 2|^  grains  (at 
the  old  ratio  of  1 :  15-98),  but  it  was  intended  to  insert  in  its 
place  one  containing  25*65  grains  less  of  pure  silver.  The 
discontinuance  of  the  old  silver  dollar  by  the  bill  was  men- 
tioned by  Mr.  Knox  in  his  report  to  the  Secretary  of  the 

'  A  brief  history  of  the  passage  of  the  bill  can  be  found  in  the  "  Report  of 
Comptroller  of  the  Currency,"  1876,  p.  170. 

*  Sherman,  Bayard,  Scott,  and  Hooper,  Houghton,  McNeely. 


THE  DEMOXETIZATION  OF  SILVER.  99 

Treasury  accompanying  the  bill  ^  when  laid  before  Congress. 
The  experts,  moreover,  to  whom  the  bill  was  sent  for  sug- 
gestion, noticed  this  change  in  our  policy : 

"The  bill  proposes  the  discontinuance  of  the  silver  dollar, 
and  the  report  which  accompanies  the  bill  suggests  the  substi- 
tution, for  the  existing  standard  silver  dollar,  of  a  trade-coin 
of  intrinsic  value  equivalent  to  the  Mexican  silver  piaster  or 
dollar. 

"  If  the  existing  standard  silver  dollar  is  to  be  discontinued 
and  a  trade-coin  of  different  weight  substituted,  I  would  sug- 
gest the  desirableness  of  conforming  to  the  Spanish-Mexican 
silver  pillared  piaster  of  1704.  .  .  .  The  coins  most  in  demand 
for  Oriental  commerce  were  for  many  years  the  pillared  Span- 
ish-Mexican piasters  ;  and  such  was  their  popularity  that  they 
continued  to  be  preferred  long  after  their  intrinsic  value  had 
been  considerably  reduced  by  wear  in  use.  The  restoration,  as 
a  trade-coin,  of  a  silver  dollar  approximating  to  the  old  stand- 
ard— to  wit,  one  containing  25  grammes  of  pure  silver — is  a 
subject  which  would  seem  to  demand  favorable  consideration."  * 

"  The  silver  dollar,  half-dime,  and  three-cent  piece  are  dis- 
pensed with  by  this  amendment.  Gold  becomes  the  standard 
money,  of  which  the  gold  dollar  is  the  unit.  Silver  is  sub- 
sidiary." ^ 

"Sec,  11    reduces   the   weight   of   the   silver   dollar  from 

'  "  The  coinage  of  the  silver  dollar  piece  ...  is  discontinued  iu  the  pro- 
posed bill.  It  is  by  law  the  dollar  unit,  and,  assuming  the  value  of  gold  to  be 
fifteen  and  a  half  times  that  of  silver,  being  about  the  mean  ratio  for  the  past 
six  years,  is  worth  in  gold  a  premium  of  about  3  per  cent  (its  value  being 
$rOS12),  and  intrinsically  more  than  7  per  cent  premium  in  other  silver  coins, 
its  value  thus  being  $1'0742.  The  present  laws  consequently  authorize  both  a 
gold-dollar  unit  and  a  silver-dollar  unit,  differing  from  each  other  in  intrinsic 
value.  The  present  gold  dollar  piece  is  made  the  dollar  unit  in  the  proposed 
bill,  and  the  silver  dollar  piece  is  discontinued.  If,  however,  such  a  coin  is  au- 
thorized, it  should  be  issued  only  as  a  commercial  dollar,  not  as  a  standard  unit 
of  account,  and  of  the  exact  value  of  the  Mexican  dollar,  which  is  the  favorite 
for  circulation  in  China  and  Japan  and  other  Oriental  countries  " — "  Sen.  Mis. 
Doc.  No.  132,"  2d  session,  41st  Congress,  p.  11. 

■■'  E.  B.  Elliott  (now  Government  Actuary),  "  Letter  of  the  Secretary  of  the 
Treasury  to  the  Speaker  of  the  House  of  Representatives,  communicating  a  re- 
port of  John  Jay  Knox,  Deputy  Comptroller  of  the  Currency,  giving  the  corre- 
spondence of  the  department  relative  to  the  revision  of  the  Mint  and  coinage 
laws  of  the  United  States,  H.  R.  Exec.  Doc.  No.  307,"  2d  session,  41st  Con> 
gress,  June  29,  1870,  p.  70. 

2  Robert  Patterson,  ibid.,  p.  19. 


100  THE  UNITED  STATES,    1V92-1873. 

412^  to  384  grains.  I  can  see  no  good  reason  for  the  proposed 
reduction  in  the  weight  of  this  coin.  It  would  be  better,  in 
my  opinion,  to  discontinue  its  issue  altogether.  The  gold  dol- 
lar is  really  the  legal  unit  of  and  measure  of  value." ' 

"  I  see  that  it  is  proposed  to  demonetize  the  silver  dollar."  * 

All  this  testimony  is  important  because  it  affords  cor- 
roborative proof  to  show  beyond  cavil  that,  in  1873,  bimetal- 
lism was  considered  an  impossibility  for  the  United  States. 
The  contrast  between  the  state  of  mind  in  1873  and  after 
the  remarkable  fall  of  silver  in  1876  is,  therefore,  very  strik- 
ing, and  demands  some  special  explanation  in  later  chapters. 

When  the  bill  came  before  Congress  for  discussion  there 
was  no  opposition  whatever  to  the  omission  of  the  silver  dol- 
lar of  412|-  grains  from  the  list  of  authorized  coins.  The 
Senate  occupied  its  time  chiefly  on  questions  of  seigniorage  ^ 
and  abrasion,*  and  the  House  on  a  question  of  the  salaries  of 
the  officials.^  The  chief  debate  was  in  the  House,  when  the 
bill  was  in  charge  of  Mr.  Hooper  (Massachusetts),  on  April  9, 
1872.  He  explained  the  bill  to  the  House  section  by  sec- 
tion,® during  the  course  of  which  he  said  : 

"  It  declares  the  gold  dollar  of  25  and  eight  tenths  grains  of 
standard  gold  to  be  the  unit  of  value,  gold  practically  having 
been  in  this  country  for  many  years  the  standard  or  measure  of 
value,  as  it  is  legally  in  Great  Britain  and  most  of  the  European 
countries.  The  silver  dollar,  which  by  law  is  now  the  legally 
declared  unit  of  value,  does  not  bear  a  correct  relative  proportion 
to  the  gold  dollar.  Being  worth  intrinsically  about  one  dollar 
and  three  cents  in  gold,  it  can  not  circulate  concurrently  with 
the  gold  coins.  .  .  .  The  committee,  after  careful  considera- 
tion^ concluded  that  twenty -five  and  eight  tenths  grains  of 
standard  gold  constituting  the  gold  dollar  should  he  declared 
the  money  unit  or  metallic  representative  of  the  dollar  of  ac- 
count. 

"  Sec.  16  re-enacts  the  provisions  of  the  existing  laws  de- 
fining the  silver  coins  and  their  weights,  respectively,  exceiJt  in 
relation  to  the  silver  dollar,  which  is  reduced  in  weight  from 
412^  grains  to  384  grains,  thus  making  it  a  subsidiary  coin  in 

*  Dr.  Linderman,  late  Director  of  the  Mint,  ibid.,  p.  30. 

*  J.  R.  Snowdon,  formerly  Director  of  the  Mint,  ibid.,  p.  38. 

3  January  9,  1871.  *  January  17,  1873.  *  January  9,  1872. 

«  "  Congressional  Globe,"  Part  III,  2d  session,  42d  Congress,  pp.  2305,  2306. 


THE  DEMONETIZATIOX  OF  SILVER.  101 

tarmony  with  the  silver  coins  of  less  denominations,  to  secure 
its  concurrent  circulation  with  them.  The  silver  dollar  of  412^ 
grains,  by  reason  of  its  bullion  or  intrinsic  value  being  greater 
than  its  nominal  value,  long  since  ceased  to  be  a  coin  of  circu- 
lation, and  is  melted  by  manufacturers  of  silverware.  It  does 
not  circulate  now  in  commercial  transactions  with  any  country, 
and  the  convenience  of  these  manufacturers  in  this  respect  can 
better  be  met  by  supplying  small  stamped  bars  of  the  same 
standard,  avoiding  the  useless  expense  of  coining  the  dollar  for 
that  purpose." 

To  this  position  no  objection  was  taken  except  that,  as 
we  had  no  gold  or  silver  then  in  circulation,  it  was  profitless 
to  legislate  on  such  questions.^  The  opposition  to  the  bill 
concerned  itself  with  seigniorage,  abrasion,  or  salaries,  and 
the  apparently  self-evident  policy  of  omitting  the  silver  dollar 
was  so  generally  accepted  that  it  was  used  by  Mr.  Kelly 
(Pennsylvania)  as  a  means  to  silence  other  objections  : 

"  All  experience  has  shown  that  you  must  have  one  stand- 
ard coin  which  shall  be  a  legal  tender  for  all  others,  and  then 
you  may  promote  your  domestic  convenience  by  having  a  sub- 
sidiary coinage  of  silver,  which  shall  circulate  in  all  parts  of 
your  country  as  legal  tender  for  a  limited  amount  and  be  redeem- 
able at  its  face  value  by  your  Government.  But,  sir,  I  again  call 
the  attention  of  the  House  to  the  fact  that  the  gentlemen  who  op- 
pose this  bill  insist  upon  maintaining  a  silver  dollar  worth  three 
and  a  half  cents  more  than  the  gold  dollar,  and  worth  seven 
cents  more  than  two  half-dollars,  and  that,  so  long  as  these  pro- 
visions remain,  you  can  not  keep  silver  coin  in  the  country."  '■ 

What  the  animus  of  Congress  was  in  respect  of  the  ques- 
tion of  bimetallism  is  perfectly  clear,  and  was  as  well  epito- 
mized as  in  any  other  words  by  the  following  remarks  : 

"Aside  from  the  three-dollar  gold  piece  .  .  .  the  only 
change  in  the  present  law  is  in  more  clearly  specifying  the  gold 
dollar  as  the  unit  of  value.  .  .  .  Gold  is  practically  the  stand- 
ard of  value  among  all  civilized  nations,  and  the  time  has  come 

'  "  This  bill  provides  for  the  making  of  changes  in  the  legal-tender  coin  of 
the  country,  and  for  substituting  as  legal  tender  coin  of  only  one  metal  instead, 
as  heretofore,  of  two.  I  think  myself  this  would  be  a  wise  provision,  and  that 
legal-tender  coins,  except  subsidiary  coin,  should  be  of  gold  alone ;  but  why 
should  we  legislate  on  this  now,  when  we  are  not  using  either  of  those  metals  as 
a  circulating  medium?  " — Mr.  Potter,  ibid.,  p.  2310. 

*   "Congressional  Globe,"  Fart  III,  2d  session,  42d  Congress,  p.  2316. 


102 


THE   UNITED   STATES,  1192-1 8*73. 


in  this  country  -when  the  gold   dollar  should  be  distinctly  de- 
clared to  be  the  coin  representative  of  the  money  unit."  * 

In  the  act  of  1792  our  "unit "  had  been  declared  (Sec. 
9)  to  be  a  silver  dollar;  in  the  act  of  18Y3,  on  the  other 
hand,  it  was  enacted  (Sec.  14) :  "  That  the  gold  coins  of  the 
United  States  shall  be  a  one-dollar  piece,  which,  at  the  stand- 
ard weight  of  twenty-five  and  eight  tenths  grains,  shall  be  the 
unit  of  value,"  etc. 

§  4.  The  act  of  1873  authorized  the  coinage  of  a  piece 
known  as  the  trade-dollar,  whose  subsequent  history  proved 
a  mystery  to  many  people,  and  which  afforded  to  speculators 
an  opportunity  for  profit.  Its  existence  was  not  due  to  the 
demand  for  ordinary  coins  at  home,  and  had  a  difierent  origin. 

It  is  a  well-known  fact  that  Oriental  nations  have  a  pecul- 
iar power  of  absorbing  ^  silver  in  great  quantities.  To  such 
an  extent  is  this  true  that  merchants  in  the  China  trade  re- 
quire silver  as  the  best  means  of  purchasing  goods  from  that 
country.  Naturally  enough,  of  the  various  coins  of  a  certain 
general  kind,  the  coin  which  contained  the  most  pure  silver, 
and  which  also  passed  at  the  same  tale  value,  was  preferred 
by  Eastern  nations.  The  Spanish  silver  dollar  was  the  coin 
originally  used  in  this  Oriental  trade,  but  later  gave  place 
to  the  Mexican  dollar.  And  within  recent  years,  until  1873, 
because  it  was  in  highest  favor  with  the  Chinese,  the  Mexi- 
can dollar  was  systematically  bought  and  sold  by  the  banks 
in  the  United  States  to  supply  merchants  who  had  payments 
to  make  in  the  East.  The  reason  for  this  is  to  be  seen  by  com- 
paring the  quantities  ^  of  pure  silver  in  the  various  coins  circu- 
lating in  Chinese  ports  (with  the  trade-dollar  also  included) : 


COIN. 

Standard 
Weight. 

Fineness. 

Pure  Silver. 

Mexican  dollar 

Grains  troy. 

417H 
416 
412^ 
420 

902| 
900 
900 
900 

Grains  troy. 

377i 
S74A- 

Japanese  yen 

American  dollar 

37U 

Trade  dollar 

378 

'  Mr.  Stoughton  (Michigan),  ibid.,  p.  2308. 

'  See  chap,  ix,  "  India  and  the  East." 

*  Linderman,  "  Money  and  Legal  Tender,"  p.  54. 


THE   DEMONETIZATION  OF  SILVER.  103 

By  this  table  it  may  be  seen  tbat  a  coin  like  the  trade-dol- 
lar, which  contained  more  pure  silver  than  the  Mexican  dollar, 
might  supersede  it  in  the  favor  of  the  Chinese,  and  thereby 
afford  a  new  market  for  the  silver  of  the  United  States — 
which,  as  early  as  1873,  began  to  feel  the  effects  of  an  increas- 
ing production.  It  was  therefore  proposed  by  Dr.  Linderman,^ 
later  Director  of  the  Mint,  to  the  Treasury  that  the  Mint 
should  coin  silver  bullion  into  the  form  which  should  meet  this 
Eastern  demand  and  better  serve  the  wants  of  our  merchants. 
The  plan  was  proposed  to  Congress  by  the  Secretary  of  the 
Treasury,  and  was  incorporated  into  the  revision  of  the  Mint 
laws  which  formed  the  main  object  of  the  act  of  1873.  As 
was  seen  in  the  preceding  section  of  this  chapter,  it  was  first 
proposed  to  coin  a  silver  dollar  of  only  384  grains  standard 
coin  ;  but  the  Senate  struck  out  this  provision,  and,  to  serve 
the  wishes  of  those  who  proposed  a  new  market  for  silver,  the 
trade-dollar  of  420  grains  was  authorized  instead.  It  was 
not  intended  to  issue  a  silver  dollar  which  should  circulate  in 
the  United  States,  but  merely  to  lend  the  authority  of  the 
Government  stamp  to  silver  bullion  in  order  to  aid  in  finding 
a  market  for  silver  in  the  East,  and  at  the  same  time  to  relieve 
merchants  from  paying  the  high  premium  exacted  for  the 
Mexican  dollars,  sometimes  amounting  to  from  11  to  22  per 
cent.'^ 

'  Linderman,  "  Money  and  Legal  Tender,"  pp.  47-59. 

*  "  I  don't  know  what  we  should  do  with  the  bulk  of  silver  if  it  was  not  dis- 
posed of  in  some  such  way.  I  am  very  well  aware  that  before  the  coinage  of 
the  trade-dollar  the  rate  of  exchange  with  China,  owing  to  the  scarcity  of  Mexi- 
can dollars,  had  caused  them  to  change  7  per  cent  here  within  a  week. 

"  Q.  Always  commanding  at  that  time  a  premium  ?  A.  Yes,  sir.  There 
was  an  extra  duty  on  them  from  Mexico  which  gave  them  a  premium  at  once; 
and  an  additional  premium  was  created  by  the  demand  for  them  for  shipment  to 
China.  I  have  paid  22  per  cent  premium  for  Mexican  coin  for  shipment  to 
China,  and  for  many  years  the  range  was  from  11  to  16  per  cent." — Testimony 
of  General  La  Grange  before  the  United  States  Treasury  Commission,  "  Report 
of  Director  of  Mint,"  1877,  p.  52. 

"  Q.  Which  do  you  like  best  to  ship,  trade-dollars  or  Mexican  dollars  ?  A. 
At  present  trade-dollars  are  better,  because  we  get  about  2  per  cent  more  premium 
oa  them  In  China." — Fung  Chung,  ibid.,  p.  53. 


104  THE  UNITED  STATES,   1Y92-1873. 

This  object  was  very  successfully  carried  out,  and  the 
trade-dollar,  authorized  by  the  act  of  1873,  was  extensive- 
ly shipped  to  China,  where  it  was  generally  received  in  the 
southern  ports.^  Inasmuch  as  a  dollar  of  371:^  grains  bore  a 
premium  in  gold  until  1874,  a  trade-dollar  containing  378 
grains  of  pure  silver  would  be  worth  still  more  in  gold  than 
the  other  dollar,  and  there  could  be  no  reason  for  its  cir- 
culation in  the  United  States. 

The  trade-dollar  was  in  reality  an  ingot,  shaped  like  a 
dollar  piece,  but  with  different  devices  than  those  on  the 
dollar  of  412^  grains ;  it  weighed  420  grains  standard  weight 
(that  is,  900  fine),  and,  consequently,  contained  378  grains  of 
pure  silver.  The  cost  of  manufacturing  the  coin  at  the  vari- 
ous mints  was  charged  upon  the  owner  of  the  bullion  pre- 
sented for  coinage ;  so  that  the  expense  of  melting,  refining, 
assaying  the  silver,  and  the  expense  of  making  the  dollar,^ 
was  borne  entirely  by  the  owners  of  bullion,  and  not  by  the 
United  States. 

As  was  said,  the  trade-dollar  was  not  intended  to  circu- 
late in  the  United  States.  Not  having  been  considered  a 
legal  coin,  it  was  not  intended  to  give  it  any  legal-tender 
quality  whatever.  It  will  be  remembered,  however,  that  the 
act  of  1873  presented  a  list  of  coins  to  which  was  given  a 
legal-tender  power  in  sums  not  exceeding  five  dollars.  By 
inadvertence,  and  without  any  intent,  the  trade-dollar  was 

•  "  Trade-dollars  are  current  by  count  at  Singapore,  Penang,  Bangkok,  and 
Saigon ;  they  are  current  by  weight  at  Swatow,  Amoy,  Foochow,  and  Canton. 
In  Hong-Kong  they  are  not  a  legal  tender,  and  the  banks  will  only  take  them 
from  each  other  by  special  arrangement ;  but  the  Chinese  take  them  freely  in 
Hong-Kong  when  they  want  coin  of  any  description,  which  is  very  seldom,  as 
they  prefer  bank-notes,  and  only  take  coin  from  the  banks  when  they  require  to 
export  it  from  the  colony.  In  the  south  of  China,  the  Straits,  and  Cochin  China 
the  trade-dollar  is  well  known  and  passes  without  comment  along  with  the  clean 
Mexican  dollars,  but  in  Shanghai  and  the  northern  ports  it  is  unknown,  and  it  is 
not  likely  to  be  current  for  a  length  of  time." — "  Report  of  the  Hong-Kong  and 
Shanghai  Banking  Corporation,  and  the  Oriental  Bank,"  January  30  and  31, 
1877,  in  "Report  of  Director  of  Mint,"  1878,  p.  10. 

*  This  was  one  and  a  quarter  per  cent  at  the  Philadelphia  Mint,  and  one  and 
a  half  at  the  San  Francisco  Mint,  on  the  tale  value. 


THE  DEMONETIZATION   OF  SILVER.  105 

included  in  this  list,  and  became  possessed  of  a  legal-tender 
power  equally  with  subsidiary  coins  to  the  limit  of  five  dol- 
lars. When  this  was  discovered,  the  error  was  corrected  by 
an  act  of  July  22,  1876,  which  took  away  any  legal-tender 
quality  from  the  trade-dollar.^  Of  its  subsequent  iiistory 
and  the  closing  of  its  career  I  shall  speak  in  another  chapiter. 

In  our  story  we  have  now  reached  another  unexpected 
and  unforeseen  incident,  the  extraordinary  fall  in  the  value 
of  silver  in  1876  and  later  years.  To  this  event  I  shall  de- 
vote the  following  chapters  in  Part  II,  treating  of  the  Indian 
demand,  the  demonetization  of  silver  by  Germany,  the  action 
of  France  and  the  Latin  Union,  and  the  causes  of  the  fall  in 
the  value  of  silver  in  1876.  Thus  prepared,  we  can  then 
intelligently  study  the  history  of  bimetallism  in  the  United 
States  subsequent  to  that  date. 

'  See  Appendix  III,  act  of  July  22,  1876,  Sec.  2. 


PART    II. 


THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 


PART    II. 

THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 


CHAPTER  YIII. 

THE   PKODrCTION   OF    GOLD    SINCE    1850. 

§  1.  The  reason  for  making  so  considerable  a  digression 
in  our  storj  of  the  bimetallic  experiences  of  tbe  United 
States  as  to  discuss  tbe  action  of  France,  Germany,  India, 
and  the  Latin  Union  in  the  chapters  of  Part  II,  is  to  make 
it  possible  to  get  a  rational  view  of  events  in  the  United 
States  in  the  period  subsequent  to  1873.  There  came  into 
the  monetary  world,  beginning  in  1872  and  amounting 
to  a  panic  in  July,  1876,  a  most  unusual  disturbance  in 
the  silver  market.  Kor  did  silver  recover  itself  after  1876. 
The  depreciation  brought  with  it  frequent  fluctuations  in 
value,  which  have  ended  in  a  generally  lower  level ;  and,  in 
September,  1885,  the  fall  was  almost,  if  not  quite,  as  low 
as  in  July,  1876.  So  far  as  it  has  become  a  matter  of  public 
discussion,  bimetallism  dates  from  this  monetary  event.  In 
our  country  the  fall  of  silver  introduced  the  declining  metal 
into  politics ;  in  Europe  it  has  excited  great  discussion,  and 
led  to  the  meeting  of  two  International  Monetary  Confer- 
ences— one  in  1878,  another  in  1881.  It  becomes  highly  es- 
sential to  the  history  of  bimetallism  in  the  United  States, — 
if  we  are  to  understand  its  movements  with  some  show  of 
insight, — to  know  what  the  facts  were  which  affected  the 
value  of  silver  in  Europe  and  the  East,  and  to  try  to  reach 
some  conclusion  as  to  the  probable  cause  of  the  extraordinary 


110     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

fall.     We  could  then  know  better  how  to  judge  the  actions 
of  the  United  States  in  the  field  of  its  monetary  policy. 

§  2.  In  a  preceding  chapter,  while  discussing  the  act  of 
1853,  we  had  occasion  to  speak  of  the  gold  discoveries  in 
the  United  States  and  Australia.  The  importance  of  these 
discoveries,  and  their  social  and  economic  influences,  are  now 
well  recognized;  but  our  nearness  to  the  events  has  con- 
cealed, perhaps,  some  of  their  effects,  or  at  least  public  at- 
tention has  not  been  called  to  them.  The  economic  influ- 
ences have  been  discussed  by  the  ablest  writers.^  The  effect 
upon  contracts  and  obligations  of  long  standing  of  an  enor- 
mous production  of  gold  has  been  fully  considered.  Mr. 
Cairnes  has,  in  a  series  of  remarkable  essays,  explained  the 
process  by  which  the  new  wealth  was  distributed  from  the 
gold-producing  countries  over  the  remainder  of  the  world,  and 
has  given  an  exposition  of  the  social  and  economic  changes 
which  were  produced  by  this  action.  Mr.  Jevons  demonstrat- 
ed beyond  any  reasonable  doubt  that  the  increase  of  the  gold 
production  had  resulted  in  a  fall  of  its  purchasing  power  of 
at  least  9  per  cent,  and  probably  of  15  per  cent.  It  will  not 
now  be  questioned,  I  think,  that  a  change  was  produced  in 
the  value  or  purchasing  power  of  gold  ;  in  other  words,  that 
it  bought  less  of  other  goods  than  before  1850.  That  is,  gold 
prices  rose,  without  implying  an  increase  in  the  cost  of  pro- 
duction of  articles  for  which  the  gold  was  exchanged. 

-  There  is  no  sacredness  about  the  value  of  gold.  Even 
though  some  persons  think  its  value  is  absolutely  stable,  this 
belief  must  have  been  destroyed  by  the  events  which  have 
happened  since  1848.  It  is  true  people  in  general  do  not 
think  gold  changes  in  value,  or  at  least  they  think  it  changes 
very  little.  And  there  is  no  doubt  whatever  that  it  is  the 
least  changeable  of  the  two  metals.     It  must,  however,  be 

'  Levasseur,  "  La  Question  d'Or  "  ;  Jevons,  "  A  Serious  Fall  in  the  Value  of 
Gold  Ascertained  "  ;  Chevalier,  "  On  the  Probable  Fall  in  the  Value  of  Gold  " ; 
Stirling,  "  Gold  Discoveries  and  their  Probable  Consequences " ;  McCulloch, 
"  Precious  Metals  "  in  the  "  Encyclopaedia  Britannica  "  ;  and,  above  all,  Cairnes, 
"  Essays  in  Political  Economy,"  the  first  four  chapters. 


THE  PRODUCTION  OF  GOLD  SINCE   1850.  m 

frankly  admitted  that  both  the  precious  metals  have  within 
thirty  years  sliown  that,  like  other  commodities,  they  are 
affected  by  ordinary  forces,  and  vary  in  their  normal  value 
under  the  same  laws  which  control  the  value  of  other  things. 
In  short,  when  it  is  admitted  that  both  gold  and  silver  are 
capable  of  a  change  in  value,  due  to  unforeseen  but  natural 
causes,  a  step  forward  has  been  made  in  the  discussion  of 
bimetallism.  Without  doubt  silver  has  changed  in  value 
more  easily  than  gold.  And,  if  either  gold  or  silver  change 
in  value  because  of  natural  forces,  it  makes  it  impossible  to 
keep  both  of  the  metals  at  such  a  permanent  relation  to  each 
other  as  will  maintain  an  invariable  ratio.  The  events  of 
1848  and  subsequent  years  are  cumulative  proof  of  this  posi- 
tion. Moreover,  as  we  shall  soon  see,  the  change  in  the  value 
of  one  metal  produces,  ipso  facto,  a  change  in  the  other. 
The  intimate  connection  of  the  two  metals  causes  reflex 
changes  upon  each  other ;  yet  the  action  of  silver  upon  gold 
is  not  the  same  as  the  action  of  gold  upon  silver. 

In  this  chapter  I  shall  confine  myself  to  stating  the  ac- 
tual facts  of  the  gold  production ;  to  marking  the  influence 
of  this  production  on  the  relative  values  of  the  two  metals ; 
and,  later,  to  discussing  their  effect  upon  our  question  of 
bimetallism  in  the  United  States.  We  have  already  seen  one 
effect  in  the  establishment  in  1853  of  a  single  gold  currency 
in  this  country.  Silver  was  driven  out,  and  we  gladly  ac- 
cepted gold  in  its  place.  In  brief,  the  United  States  was 
the  flrst  country  of  the  world  to  take  advantage  of  the  new 
production,  and  from  its  surjjlus  treasures  to  secure  for  itself 
a  gold  currency.  We  shall  soon  see  how  the  same  thing  was 
accomplished  in  other  countries. 

§  3.  The  magnitude  of  the  gold  production  since  1850  is 
the  marked  characteristic  of  this  period.  The  annual  yield 
of  gold  in  past  centuries  has  been  insignificant  in  comparison 
with  the  annual  production  in  the  years  following  the  dis- 
coveries in  Australia  and  California.  Some  years  before,  the 
Kussian  mines  had  been  increasing  the  supply ;  but  from  a 
production  of  about  $15,000,000  a  year  in  1840,  the  supply 


112     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

rose  to  more  than  $150,000,000  a  year  soon  after  1850. 
This  phenomenon,  moreover,  was  accompanied  by  an  increase 
in  the  production  of  silver  of  from  25  to  50  per  cent  a  year.  The 
comparative  extent  of  the  new  gold  production  may  be  seen 
by  Chart  IX,  previously  mentioned,  which  gives  the  yield 
from  the  mines  in  the  years  since  the  discovery  of  America. 
The  sudden  and  remarkable  ascent  of  the  gold  product  on  the 
chart  after  1850  is  all  the  more  noticeable  because  of  the  com- 
parison with  previous  years.  In  fact,  the  gold  production  is 
the  striking  feature  in  this  portion  of  our  monetary  history. 

The  figures  which  have  been  collected  at  length  in  Ap- 
pendix I  give  information  only  as  to  the  annual  supply.  'No 
confidence  is  to  be  placed  in  guesses  as  to  the  amount  of  the 
precious  metals  actually  in  existence  in  1848,  or  in  any  other 
period.  In  the  nature  of  things  we  can  not  know  how  much 
has  been  irretrievably  lost,  consumed  in  the  arts,  or  for  ever 
withdrawn  from  money  uses.  The  estimates  made  are  worth- 
less as  statistics  from  which  generalizations  can  be  drawn  in 
regard  to  the  effects  of  the  new  supply  upon  the  value  of  the 
two  metals.  The  statistics  of  the  annual  supply  are  more 
trustworthy,  although  even  these  vary  with  every  authority. 
No  two  persons  agree  even  in  regard  to  the  annual  supply. 
In  the  period  ^  preceding  1850  I  have  used  the  figures  pre- 
pared by  the  distinguished  German  economist,  Dr.  Adolf 
Soetbeer.  In  regard  to  the  annual  production  since  1850,  I 
have  carefully  collated  all  the  tables  which  have  been  com- 
piled by  leading  authorities  in  Germany,  England,  France, 
and  the  United  States,  and  placed  them  in  parallel  columns 
for  comparison.  It  will  be  noticed  that  Soetbeer's  figures 
are  larger  than  those  of  any  other  authority,  and  yet  I  am 
inclined  to  think  that  they  are  not  far  from  the  truth.  In 
considering  the  total  production  of  gold  and  silver  in  the 
years  between  1850  and  1876,  it  will  be  found  that  there  is 
a  rough  correspondence  in  the  totals.     That  the  figures  are 

*  Some  figures  have  been  given  by  Mr.  Del  Mar  for  this  period,  in  the  "  Re- 
port of  the  United  States  Silver  Commission,  1811,"  but  they  do  not  inspire 
confidence. 


THE  PRODUCTION  OF  GOLD  SINCE   1850.  II3 

approximately  correct  there  can  be  little  doubt,  and  tliey 
will,  therefore,  serve  our  general  purpose.  The  reader  will 
consequently  have  in  these  tables  all  the  necessary  data  for 
a  knowledge  of  the  extraordinary  gold  production  since  the 
middle  of  the  present  century.  It  is  the  third  great  increase 
in  the  production  of  the  precious  metals,  of  which  the  first 
occurred  soon  after  the  discovery  of  America,  and  the  second 
at  the  close  of  the  last  century.  The  first  two  lowered  the 
value  of  silver  relatively  to  other  articles,  including  gold  ;  the 
last  lowered  the  value  of  gold  relatively  to  other  articles,  includ- 
ing silver ;  but,  then,  later  it  had  another  effect  on  silver  itself. 

§  4.  Inasmuch  as  gold  and  silver  are  known  to  have 
changed  in  value,  like  other  commodities,  under  the  influ- 
ence of  a  lowered  cost  of  production,  which  has  increased 
the  supply  and  so  the  total  quantity  in  existence,  we  are  led 
at  once  to  discuss  briefly  the  reasons  which  give  gold  and 
silver  value  as  money.  Any  commodity  has  value  which  is 
limited  in  quantity  and  yet  satisfies  some  human  desire. 
Apart  from  their  power  to  please  as  ornaments  and  for  uses 
in  the  arts,  gold  and  silver  satisfy  certain  desires  arising  from 
the  need  of  a  medium  of  exchange.  The  inconveniences  of 
barter  gave  rise  to  desires  for  money.  The  metals  which 
have  best  satisfied  these  desires  are  gold  and  silver.^  The 
business  world  desires  as  money  a  metal  which  is  as  stable  in 
value  as  possible,  and  which  remains  in  this  condition  for  as 
long  a  time  as  possible  ;  one  which  has  considerable  value  in 
small  bulk,  especially  where  transactions  are  large ;  and 
which  possesses  the  other  accepted  qualities,  such  as  homo- 
geneity, divisibility,  cognizability,  etc. 

Steadiness  of  value,  as  we  saw  in  Hamilton's  report,  is 
popularly  supposed  to  belong  to  gold.  Moreover,  in  great 
centers  of  commerce  and  trade,  where  the  total  of  transac- 
tions rose  to  great  sums,  gold  was  preferred  to  silver  because 
of  its  smaller  bulk.     Then,  as  credit  devices  grew  and  ex- 

*  Cf.  Mill's  chapters  on  Money,  and  Jevons's  "  Money  and  Mechanisn:  of 
Exchange,"  chap,  iii,  for  an  explanation  of  the  functions  of  money  and  the 
proper  quahties  possessed  by  a  metal  used  as  a  medium  of  exchange. 


114:  THE  LATE  FALL  IN  THE  VALUE   OF  SILVER. 

tended,  the  actual  handling  of  the  metal  was  saved  by  the 
use  of  banks  of  deposit.  The  business  world  began  to  shun 
a  cumbrous  medium,  and  at  the  same  time  to  cling  to  what 
was  believed  to  be  most  stable  in  value.  Without  now  as- 
serting that  one  metal  is  more  stable  than  the  other  in  value, 
what  I  do  assert  is  that  monetary  history  reveals  in  every 
modern  commercial  country  a  prejudice  in  favor  of  gold  as 
against  silver.  Granted  that  it  is  only  a  prejudice,  yet, 
whatever  it  may  be  termed,  it  exists.  The  world  of  com- 
merce, whatever  the  reason  may  be,  helieves  in  gold.  Kor 
will  we  say  whether  this  belief  is  fortunate  or  not.  It  is 
our  endeavor  only  to  ascertain  the  fact.  But  it  is  a  fact 
which  must  be  taken  into  account  in  discussing  the  influ- 
ence of  the  gold  discoveries  on  the  values  of  gold  and  silver. 
The  proof  of  it  will  be  found  as  we  go  on  with  our  story.  It 
has  already  been  displayed  in  the  legislation  which  gave  the 
United  States  a  gold  currency  in  1853.  In  brief,  gold  satis- 
fies the  desires  of  men  for  a  medium  of  exchange  better 
than  silver.  This  is  not  a  theoretical  proposition.  It  is  sim- 
ply a  fact  to  be  ascertained  by  a  historical  inquiry. 

If,  then,  it  be  true  that  men  in  trade  have  a  greater  desire 
for  gold  than  for  silver  as  money,  this  is  the  cause  of  a  de- 
mand for  gold ;  since  demand  is  a  desire  for  a  commodity 
coupled  with  purchasing  power.  This  desire  for  gold  is  the 
desire  for  it  as  a  medium  of  exchange.^  That  is,  if  men  of 
business  are  left  to  seek  the  metal  they  naturally  prefer,  gold 
will  be  chosen.  Now,  however,  the  law  of  a  land,  which 
fixes  a  legal-tender  value  of  a  given  amount  upon  one  or  the 
other  metal,  can,  through  the  operation  of  Gresham's  law, 
bring  into  circulation  the  cheapest  metal,  whether  the  com- 
munity has  a  preference  for  it  or  not.  But  whenever  the 
state  follows  the  wishes  of  its  people,  if  it  is  a  commercial 
state,  it  will  be  found  that  there  is  a  very  strong  tendency 
among  its  population  to  the  adoption  of  gold  in  preference 
to  silver.  In  other  words,  although  law  can  override  popu- 
lar wishes  in  this  respect  and  decide  that  the  cheapest  metal 

'  We  here  pass  bj  the  question  of  its  consumption  in  the  arts. 


THE  PRODUCTION  OF  GOLD  SINCE   1850.  115 

shall  be  used,  the  natural  forces  governing  demand  still  exist, 
and  will,  sooner  or  later,  make  themselves  felt.  It  is  quite 
unlikely,  therefore,  that  there  will  be  any  falling  off  in  the 
demand  for  gold  for  money  uses.  The  only  question,  as  all 
must  admit,  is  rather,  whether  the  supply  will  be  sufficient 
or  not.  Law  can  create  a  demand  for  the  metal,  which 
would  not  naturally  be  chosen,  ,only  by  overvaluing  it  in  its 
legal  ratio,  and  thus  making  it  profitable  to  drive  the  pre- 
ferred metal  from  use.  The  gain  of  the  money-changer  can 
be  absolutely  depended  upon  to  bring  this  about.  But  if 
both  metals  were  put  upon  an  equal  basis  at  the  Mint — if 
such  a  thing  is  possible  for  any  time — it  will  be  found  that 
gold  is  preferred  in  large  payments  and  silver  for  small  pay- 
ments. The  natural  convenience  of  a  trading  population 
demands  this.  A  comparison  of  the  countries  which  use 
silver — China,  India,  and  semi-civilized  countries — with  the 
important  commercial  states — England,  Germany,  and  the 
United  States — which  use  gold,  affords  a  striking  illustration 
of  this  proposition. 

§  5.  Setting  before  us  as  an  object  to  discover  the  reasons 
for  the  fall  in  the  value  of  silver  in  1876 — which  has  been 
the  beginning  of  modern  bimetallic  discussions — we  shall 
confine  ourselves  to  the  effect  which  the  great  production  of 
gold  has  had  upon  the  value  of  silver.  And  to  this  end  we 
must  bear  in  mind  what  has  been  said  in  tlie  last  section  in 
regard  to  the  prejudice  for  gold.  Then  there  must  be  taken 
with  this  preference  for  gold  the  possibility  of  satisfying  the 
demand.  The  amount  of  gold  produced,  therefore,  is  an 
important  part  of  our  problem.  We  should  then  proceed  to 
get  some  idea  of  this  amount. 

"We  find  ourselves,  in  the  period  following  1850,  con- 
fronted with  an  enormously  increased  production  of  gold. 
How  enormous  it  w^as  I  do  not  think  has  been  generally 
recognized  in  our  monetary  discussions,  particularly  of  late 
in  those  dealing  with  the  appreciation  of  gold.  It  seems  al- 
most incredible  to  say  that,  in  the  25  years  following  1850, 
as  much  gold  was  given  forth  by  the  mines  as  had  been  pro- 


116     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

duced  to  that  time  since  the  discovery  of  America  by  Colum- 
bus.    And  yet  it  is  literally  true  : 

Gold.  Silver. 

1493-1850 $3,314,653,000  $7,358,450,000 

1851-1875 3,317,625,000  1,395,125,000 

The  facts  may  be  more  conveniently  seen  in  their  proper 
relations  in  Chart  X,  which  represents,  first,  by  square  areas, 
the  total  quantities  of  gold  and  silver  ^  produced  since  the 
discovery  of  America  down  to  1850.  During  this  time  of 
357  years  it  will  be  seen  that  more  than  twice  as  much  silver 
as  gold,  in  respect  to  value,  was  produced.  And  we  have 
already  seen  that  in  this  period  there  occurred  two  great  falls 
in  the  value  of  silver,  or  at  least  an  almost  continuous  fall 
of  silver  (see  Chart  IV).  But  what  is  remarkable  is  that — 
while  gold  to  an  amount  so  much  more  than  enough  for  the 
ordinary  uses  of  commerce  was  produced  from  1493  to  1850 
that  it  fell  in  its  purchasing  power — in  the  25  years  succeed- 
ing 1850  an  amount  equal  to  the  product  of  the  previous 
357  years  was  suddenly  added  to  the  existing  stock  of  the 
world.  This  was  an  amount  far  more  than  was  necessary 
for  the  growth  of  trade  and  population  in  those  25  years, 
and,  as  Prof.  Jevons  has  shown,  it  resulted  in  a  loss  of  its 
purchasing  power  of  from  9  to  15  per  cent.  The  wonder  is 
that  its  value  did  not  fall  more ;  and  it  would  have  fallen 
more  if  it  had  not  been  for  the  influences  which,  as  we  shall 
later  see,  widened  the  field  for  its  use.  Chart  X,  in  the  sec- 
ond place,  shows  an  area  for  the  period  since  1850  as  great 
for  gold  as  in  the  previous  period  ;  but,  while  in  the  previ- 
ous period  the  area  for  silver  was  twice  as  large  as  that  of 
gold,  in  the  later  and  short  period  of  25  years  the  silver 
product  is  less  than  one  half  as  much  as  that  of  gold,  and 
about  one  fifth  of  the  silver  product  from  1493  to  1850. 

§  6.  ISTow  what  was  the  effect  upon  the  relative  values 
of  the  two  metals  of  suddenly  doubling  the  quantity  of 
gold,  without  anything  like  a  proportional  increase  of  silver  ? 
First  of  all,  gold  fell  in  value,  both  in  regard  to  silver  and  to 

*  I  have  here  used  Dr.  Soetbeer's  figures.     See  Appendix  I,  Tables  A  and  B. 


CHART  X. 

Relative  Froduction  of  Gold  and  Silver  in  1493-1850  and  in  1851-1875,  shown  by 

relative  areas. 


VALUE    OF    GOLD 

PRODUCED    IN 

357    YEARS 

1493-1850, 

3,314,553,000 
DOLLARS. 


VALUE   OF    SILVER 

PRODUCED    IN 

357    YEARS. 

1493-1850, 

7,358.450,000 
DOLLARS. 


VALUE   OF    GOLD 

PRODUCED    IN 

25  YEARS, 

1851-1875, 

3,317,625,000 
DOLLARS. 


VALUE    OF    SILVER 

PRODUCED    IN 

25    YEARS, 

1851-1875, 

1,395,125,000 
DOLLARS. 


THE  PRODUCTION  OF  GOLD  SINCE    1850.  117 

all  commodities.  The  ratio  between  gold  and  silver,  which 
had  risen  from  1 :  15  to  1 :  16,  now  showed  the  effect  of  the 
cheapening  in  gold  by  dropping  to  1 :  15-3  for  a  time.  This 
was  the  first  eifect.  But  a  second  effect  soon  became  visible. 
The  cheapened  gold  began  to  drive  out  silver  from  the  cur- 
rencies of  the  United  States  and  Europe,  because,  at  former 
ratios  fixed  before  the  gold  discoveries,  gold  was  overvalued 
at  the  mints,  and  so  by  Gresham's  law  came  into  circulation 
as  the  sole  medium  of  exchange.  But  the  matter  worthy  of 
most  attention  is  that  this  exchange  of  gold  for  silver  was 
seen  and  watched,  not  only  without  opposition,  but  even 
with  satisfaction.  Had  there  been  a  similar  flow  of  silver 
into  the  place  of  gold,  there  would  have  been  no  such  com- 
placency. Here,  again,  is  the  inference  for  gold  which  we 
find  so  constantly  present.  Tn^  effect  of  this  movement  was, 
of  course,  to  prevent  gold  from  falling  in  value  as  much  as  it 
would  otherwise  have  done ;  and  to  withdraw  the  previously 
existing  demand  from  silver  for  use  as  a  medium  of  exchange 
in  Western  commercial  nations.  The  very  cheapness  and 
abundance  of  gold  increased  the  demand  for  it  for  use  as  a 
medium  of  exchange,  and  ijpso  facto  diminished  the  demand 
for  silver.  The  world  could  choose  between  the  two.  There 
was  silver  enough  ;  but,  as  soon  as  gold  became  plentiful,  there 
was  no  doubt  for  a  moment  which  metal  was  preferred.  It 
was  in  the  same  spirit  in  which  the  modern  world  made  choice 
between  the  railway  and  the  stage-coach  as  a  means  of  trans- 
portation. Wherever  choice  was  possible, the  best  and  most 
convenient  means  of  locomotion  was  taken.  The  same  idea 
has  been  expressed  by  Mr.  Cairnes^  in  the  following  words: 

"  If  anything  unfits  one  commodity  for  measuring  the  value 
of  another,  it  is  the  circumstance  that  they  may  both  be  ap- 
plied to  common  purposes.  No  one  would  think  of  measuring 
the  fluctuations  in  wheat  by  comparing  it  with  oats,  because, 
both  grains  being  employed  for  the  same  or  similar  purposes, 
any  change  in  the  value  of  one  is  sure  to  extend  to  the  other. 
When,  e.  g.,  the  wheat  crop  is  in  excess  while  the  oat  crop 
is  an  average  one,  it  always  happens  that  a  portion  of  the  con- 

'  "Essays  in  Political  Economy,"  p.  141. 


118  THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

sumption,  which  in  ordinary  years  falls  upon  oats,  is  thrown 
upon  wheat,  the  effect  of  which  is  at  once  to  check  the  fall  in  the 
price  of  the  more  abundant  grain,  while,  by  diminishing  the 
need  for  the  other,  it  causes  it  to  participate  in  the  decline. 
The  influence  of  the  increased  abundance  of  one  commodity  is 
thus  distributed  over  both,  the  fall  in  price  being  less  intense 
in  degree  in  proportion  as  it  is  wider  in  extent.  Now  this  is 
precisely  what  is  happening  in  the  relations  of  gold  and  silver. 
The  crop  of  gold  has  been  unusually  large  ;  the  increase  in  the 
supply  has  caused  a  fall  in  its  value  ;  the  fall  in  its  value  has 
led  to  its  being  substituted  for  silver  ;  a  mass  of  silver  has 
thus  been  disengaged  from  purposes  which  it  was  formerly 
employed  to  serve,  and  the  result  has  been  that  both  metals 
have  fallen  in  value  together,  the  depth  of  the  fall  being 
diminished  as  the  surface  over  which  it  has  taken  place  has 
been  enlarged.  The  scene  on  which  this  interchange  of  gold 
and  silver  has  hitherto  been  exhibited  on  the  largest  scale  is 
the  currency  of  France,  in  which,  owing  to  the  existence  of  a 
double  standard,  .  .  .  one  or  the  other  metal  is  employed  ac- 
cording as  its  worth  in  the  markets  of  the  world  happens  to 
vary  in  relation  to  its  valuation  at  the  French  Mint." 

In  succeeding  chapters  we  shall  find  abundant  evidence 
of  this  interchange  of  gold  and  silver,  which  was  begun  by 
the  United  States  in  1853.  At  the  present  we  shall  go  on 
to  narrate  how  France  followed  this  example  ;  and  subse- 
quently we  shall  see  how  Germany  did  the  same.  Then  it 
will  remain  to  show  how  the  Latin  Union  was  forced  to  fol- 
low practically  the  same  course. 

§  7.  The  first  marked  effect  of  the  new  gold  on  the  cur- 
rencies of  Europe  was  seen  in  France,  furnishing  again  a 
very  striking  illustration  of  Gresham's  law. 

Since  1803  a  legal  ratio  of  1  :  15^-  had  been  maintained 
by  France  without  change.  Inasmuch  as  the  market  ratio 
had  never  been  as  low  as  1  :  15|-  between  1820  and  1850, 
but  rather  nearer  1 :  16,  the  French  legal  ratio  gave  gold  a 
less  value  in  the  form  of  coin  than  it  possessed  in  the  form  of 
bullion,  while  silver  was  given  a  greater  value  in  coin  than 
it  possessed  as  bullion.  As  a  natural  consequence,  gold  dis- 
appeared from  circulation  and  silver  took  its  place ;  so  that 
by  1850  the  main  part  of  the  circulation  in  France  consisted 
of  silver. 


CHART  XI. 


z.    or 
-|Oj 

i  § 

100 
80 

i 
EXCESS  OF  EXPOR 
.          FR( 

rS  AND  IM 
M  AND  INI 

PORTS  OF 
ro  FRANC 

GOLD  AN[ 
:,  1849    1 

)  SILVER 
882. 

y 

100 
80 

/ 

|\ 

A 

1  / 

1 

1 

/ 

i    1 

60 
40 

' 

',    I 

60 
40 

\ 

^ 

1 

\ 

t 

11 

/ 

v 

20 

i 

/ 

\  A 

20 

^A 

1 
1  ^ 

' 

M 

y>     '<> 

y 

( 

^/\ 

0 

/ 

' 

/  \ 

0 

I 

f 

' 

r 

', 

> 

f 

/ 

1 

''1 

20 

30 

"l 

\ 

If 

•to 

\ 

\ 
-\ — 

1 

^i 

\h- 

40 

60 



— Vt 

60 

\j 

Silver. 

'si                   i                   s                   ii  s 

Note:    When  imports  exceed  exports  the  line  moves  above  the  base-lint 
at  0;  when  exports  exceed  imports,  the  line  moves  below  the  base-line. 


THE  PRODUCTION  OF  GOLD  SINCE    1850. 


119 


The  discoveries  of  gold  exactly  reversed  this  situation. 
Gold  fell  in  value  ;  its  relation  to  silver  changed  so  that  the 
ratio  remained  below  15^  until  1867  (see  Chart  XIII).  Un- 
der these  conditions,  consequently,  a  revolution  took  place  in 
the  French  currency  between  1853  and  1865.  As  things 
then  stood,  the  ratio  at  the  Mint  was  still  1  :  15|-,  while  in 
the  market  it  was  lower  than  that,  or  somewhat  nearer  1 :  15. 
As  a  consequence  of  this,  money-changers  quickly  saw  that 
an  ounce  of  gold  exchanged  for  15|^  ounces  of  silver  in  the 
shape  of  coin,  but  for  less  than  15^  ounces  of  silver  in  the 
shape  of  bullion.  That  is,  gold  was  now  overvalued  by 
the  legal  ratio  (as  silver  had  been  before) ;  and  in  the  form 
of  bullion  silver  bought  more  of  gold  than  it  did  in  the  form 
of  coin.  Consequently,  as  long  as  this  state  of  affairs  con- 
tinued, and  since  "free  coinage"  existed,  there  was  a  stream 
of  gold  flowing  to  the  French  Mint  for  coinage,  while  the 
silver  rapidly  disappeared  from  circulation,  and  even  left  the 
country.  How  this  process  went  on  may  be  seen  by  the  fol- 
lowing table  (accompanying  Chart  XI),  which  gives  in  mill- 
ions of  dollars  the  excess  of  exports  and  imports  from  and 
into  France  ^  after  1849  : 


Gold. 

SiLVEE. 

TEAKS. 

Excess  of  im- 
ports. 

Excess  of  ex- 
ports. 

Excess  of 
imports. 

Excess  of 
exports. 

1849 

1-2 

3-4 

17-0 

3-4 

57-8 

83-2 

43-6 

75-0 

89  2 

97-6 

107-8 

62-2 

'sV-o 

2-4 

"4-8 

48-f 
14-( 
15( 

3 

1850 

1851 

1852 

1853 

0-6 
23-4 

1854 

32-8 

1855 

39-4 

1866 

56-8 

1857 

720 

1858 

3-0 

1859 

34-2 

I860 

31-4 

1861 

12-4 

1862 

17-2 

1863 

13-6 

1  Report  to  H,  C.  on  "  Depreciation  of  Silver,"  1876,  Appendix,  pp.  86,  87, 
continued  since  1875  from  the  "  British  Statistical  Abstract." 


120 


THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 


Gold. 

SiLVEB, 

TEAE8. 

Excess  of  im- 
ports. 

Excess  of  ex- 
ports. 

Excess  of 
Imports. 

Excess  of 
exports. 

1864 

25-0 
30-0 
930 
81-8 
42-4 
55-0 
23-8 

'8V-2 
90-8 
100-6 
87-2 
47-2 

2"2 
18-4 

42-8 
]0'6 
21-6 

3.50 
42-6 

9-0 

37-8 
21-8 
22-4 
7-0 
3-0 
20-4 
36-2 
72-0 
38-8 
29-8 
20-8 
23-8 
15-2 
7-8 
10-2 
18-2 

8-4 

1865 

1866 

1867 

1868 

1869 

1870 

1871 

1872  

1873 

1874 

1875 

1876 

1877 

1878 

1879 

1880 

1881 

1882 

During  the  years  from  1852  to  1864  France  absorbed 
through  direct  imports  about  $680,000,000  of  gold,  and 
ejected  about  $315,000,000  of  silver.  The  French  mints 
were  actively  engaged  in  coining  this  gold  into  the  form  in 
which  its  legal  value  was  greater  than  as  bullion. 

The  effect  of  this  great  absorption  of  gold  by  France  on 
the  value  of  silver  is  thus  fully  noticed  by  Mr.  Cairnes  ^  while 
the  movement  was  going  on  in  1860  : 

"  Until  a  recent  period  the  metal  which  formed  the  staple 
of  the  French  currency  was  silver,  but,  owing  to  the  fall  in  the 
value  of  gold,  consequent  upon  the  discoveries,  gold  is  now 
[1860]  rapidly  taking  its  place  and  becoming  the  principal 
medium  of  circulation.  Up  to  the  year  1852  the  importation 
of  silver  into  France  was  always  largely  in  excess  of  its  expor- 
tation ;  but  in  that  year  the  tide  turned,  and  has  since  continued 
flowing  outward  with  increasing  volume.  M.  Chevalier  states 
that  by  the  end  of  1857  France  had  parted  with  45,000,000^. 
sterling  of  silver.  On  the  other  hand,  during  this  time  she  had 
coined  more  than  100,000,000?.  sterling  of  gold.  The  currency 
of  France  has  thus,  to  borrow  the  curious  but  not  unapt  figure 
of  our  author,  played  toward  gold  the  part  of  a  parachute  to 


1 "  Essays  in  Political  Economy,"  p.  142. 


THE  PRODUCTION  OF  GOLD  SINCE   1850.  121 

moderate  its  descent.  But  in  proportion  as  gold  has  tlius 
found  a  market,  silver  has  been  deprived  of  one  ;  and  the 
45,000,000/.  of  silver  liberated  from  the  currency  of  France  is 
as  much  an  addition  to  the  disposable  supply  in  the  world,  and 
tends  as  effectually  to  lower  its  value,  as  if  it  had  been  raised 
immediately  from  the  mines.  The  fall  in  the  value  of  gold  has 
thus,  up  to  the  present  time,  been  at  once  checked  and  con- 
cealed— checked  by  being  substituted  for  silver,  and  concealed 
by  being  compared  with  it." 


CHAPTEK  IX. 

INDIA   AJSTD   THE   EAST. 

§  1.  The  discarded  silver  of  France  found  a  liome  in  tlie 
East.  As  early  as  1860  Mr.  Cairnes  wrote  ^  of  tlie  substitu- 
tion of  gold  for  silver : 

"  Australia  aud  California  have,  during  the  last  eight  or  ten 
years  [1860],  sent  into  general  circulation  some  two  hundred 
millions  sterling  of  gold.  Of  this  vast  sum  portions  have  pene- 
trated to  the  most  remote  quarters  of  the  world  ;  but  the  bulk 
of  it  has  been  received  into  the  currencies  of  Europe  and  the 
United  States,  from  which  it  has  largely  displaced  the  silver 
formerly  circulating,  the  latter  metal,  as  it  has  become  free, 
flowing  off  into  Asia,  where  it  is  permanently  absorbed." 

France  aud  the  United  States  saved  gold  from  deprecia- 
tion to  a  certain  extent  by  absorbing  a  vast  quantity  of  the 
new  supply  ;  this  process,  however,  displaced  a  great  amount 
of  silver.  India,  on  the  other  hand,  now  saved  silver  from 
depreciation  to  a  certain  extent  by  its  absorption  of  the 
heavier  metal  no  longer  in  use  by  Europe.  This  power  of 
India  and  the  East  to  absorb  apparently  an  unlimited  amount 
of  silver  is,  and  has  been,  one  of  the  chief  factors  in  the 
question  of  the  relative  values  of  the  two  precious  metals, 
and  requires  some  further  notice. 

The  demand  of  Oriental  nations  for  the  precious  metals, 
and  especially  for  silver,  is  a  natural  consequence  of  their 
barbaric  taste  for  ornaments  and  their  want  of  civilized 
methods  of  exchange. 

The  passion  for  ornaments  seems  to  be  a  source  of  de- 
mand for  silver  which  is  likely  to  continue  until  the  race 

1  "  Essays  in  Political  Economy,"  p.  79. 


INDIA  AND  THE  EAST.  123 

outgrows  its  barbaric  conditions.  Once  given  the  passion 
for  ornament,  that  one  of  the  precious  metals  will  be  most 
in  demand  which  is  cheapest,  and  consequently  within  the 
reach  of  an  indigent  population.  This  is  the  reason  why 
silver  is  so  much  desired  by  Eastern  merchants  for  pur- 
chases. Although  the  people  of  India  are  very  poor,  and 
are  miserably  housed,  yet  they  place  their  little  all  in  the 
form  of  ornaments,  when  the  peasantry  of  England  would 
have  added  to  their  stock  of  utensils  or  of  furniture.  The 
silver  rupees  coined  by  the  Indian  Government  and  circu- 
lated in  India  suffer  from  a  very  considerable  melting  down 
by  the  natives  to  satisfy  this  demand  for  decoration.  "  In 
every  large  village  there  is  a  silversmith,  or  some  one  who 
works  in  silver,  and  as  soon  as  a  man  gets  a  few  rupees  he 
employs  a  silversmith  to  come  to  his  house  and  make  the 
ornaments  there,  who  brings  his  little  implements  required 
for  manufacturing  it,  and  there  the  rupees  are  made  into 
ornaments."  ^  "  The  natives  never  invest  their  money  in 
the  way  in  which  civilized  nations  look  upon  an  investment. 
A  native,  when  he  realizes  a  little  money,  puts  it  into  the 
form  of  ornaments  on  the  females  of  his  family,  and  in  times 
of  scarcity  these  ornaments  are  taken  to  the  banlvcrs  and 
sold."  ^  "  Some  of  the  records  of  the  old  Benares  Mint  show 
that,  in  times  of  scarcity,  the  greater  part  of  the  silver  brought 
to  that  Mint  to  be  coined  was  in  the  shape  of  ornaments."  ^ 
That  this  condition  of  affairs  still  prevails  may  be  seen  by 
the  events  of  the  last  few  years.  During  the  recent  famine 
in  India,  from  1877  to  1880,  the  following  amounts  *  of  silver 
ornaments  were  brought  to  the  mints  for  coinage : 

1877-1878 124  lacs  (100,000)  of  rupees. 

1878-1879 116     "  "  " 

1879-1880 _92     "  "  " 

Total 332     "  "  "         ($16,000,000). 

The  desire  for  decoration  is  not  confined  in  its  effects  to 
silver  alone.     The  poorest  can  only  expect  to  have  brass  or 

1  "  H.  C.  Report  of  1876,"  Q.  1,046.  ^  Ibid.,  Q.  947. 

»  Ibid.,  Q.  1,010.  *  "French  Report  on  Conference  of  1881,"  i,  p.  63. 


124:  THE  LATE  FALL  IN  THE  VALUE   OF  SILVER. 

clay,  but  those  wlio  can  afford  it  have  silver  or  gold.^  It  is 
a  matter  of  pride  at  great  festivals  that  the  children  should 
make  a  display  of  ornaments,  and  they  vie  vrith  each  other 
in  showing  the  greatest  number.  In  this  process  they  have 
as  eager  a  demand  for  gold  as  for  silver,  provided  they  can 
obtain  gold.  "  When  a  man  (in  India)  gets  a  considerable 
amount  of  silver  ornaments,  he  will  sell  these  for  the  purpose 
of  converting  them  into  one  gold  ornament ;  because  it  adds 
to  his  prestige  in  the  village  if  one  individual  of  his  family 
has  a  large  gold  armlet,  or  other  ornament."  ^  Indeed,  the 
demand  of  India  for  gold  is  of  considerable  importance,^  as 
may  be  seen  by  the  tables  giving  the  imports  of  both  gold 
and  silver  into  British  India  in  Appendix  VI.  More  than 
$450,000,000  of  gold  was  retained  by  India  between  1855 
and  1880.  The  demand  for  gold  is  only  one  form  of  expres- 
sion of  the  insatiate  passion  for  ornament,  since  gold  is  not 
a  legal  tender,  and  is  not  used  as  a  medium  of  exchange  in 
India  to  any  extent.  But  as  silver  is  the  cheaper  of  the  two 
metals,  both  of  which  are  desired  for  this  purpose  of  orna- 
ment, the  heaviest  demand  of  a  population  of  about  237,000,- 
000  of  people,  which  is  by  no  means  rich,  falls  upon  silver. 

§  2.  The  second  cause  of  a  demand  for  silver  in  the  East, 
so  soon  as  the  need  of  money  is  appreciated,  is  for  its  use  as 
a  medium  of  exchange.  Throughout  a  large  extent  of  terri- 
tory in  India,  transactions  are  still  carried  on  by  barter.*  In 
the  interior  of  Bengal,  some  years  ago,  exchanges  were  ef- 
fected chiefly  by  copper  coins  and  cowry-shells,  while  but 
very  little  of  silver  was  in  circulation,  and  whatever  appeared 
was  either  hoarded  or  manufactured  into  ornaments.  But 
silver  will  be  the  best  natural  medium  of  exchange  for  the 

»  "H.  C.  Report  of  1876,"  Q.  1,047. 

*  Ibid.,  Q.  1,050.  Mr.  Cairnes  also  quotes  Mr.  Alexander  Forbes :  "  It  has 
often  been  said  that  the  natives  (of  India)  hoard  silver ;  now  my  experience  is 
that  they  do  not  hoard  silver ;  they  hoard  gold ;  and  that  the  silver  is  actually 
required  for  the  commerce  of  the  country." — "  Essays  in  Political  Economy,"  p. 
94,  note. 

^  Ibid.,  Q.  938.  Gold  "  is  turned  into  ornaments,  used  in  manufactures,  and 
is  hoarded."     .  *  Ibid.,  Q.  913  and  1,041. 


INDIA  AND  THE  EAST.  125 

greater  part  of  India,  because  the  mass  of  the  people  are 
poor,  and  consequently  the  transactions  are  on  a  scale  so 
small  that  thej  can  be  settled  only  by  the  use  of  the  cheaper 
metal.  There  being  much  value  in  a  small  bulk  of  gold,  it 
is  needed  only  in  comparatively  large  transactions.  This  is 
the  explanation  why  silver  is  the  usual  currency  of  semi-civ- 
ilized countries.  India,  however,  is  in  a  condition  to  use  more 
silver  money.  Not  only  can  the  scanty  circulation  in  districts 
where  the  advantages  of  a  medium  of  exchange  are  already 
recognized  be  profitably  enlarged,  but  the  districts  where 
little,  if  any,  money  is  in  use  must,  as  they  come  under  the 
influence  of  civilized  habits  and  business  customs,  some  day 
feel  the  need  of  silver  as  an  escape  from  the  inconveniences 
of  barter.  The  capacity,  therefore,  of  Eastern  nations  like 
India  to  absorb  a  very  large  amount  of  silver  as  a  medium  of 
exchange  is  very  great.  But,  coupled  with  their  extraordi- 
nary passion  for  gold  and  silver  ornaments,  we  can  see  why 
it  is  that  it  has  been  generally  believed  that  the  East  has  a 
practically  unlimited  demand  for  silver.  (We  have  already 
seen  how  the  United  States  tried  to  take  advantage  of  this 
characteristic  in  the  coinage  of  the  trade-dollar.)  So  that 
whenever  the  Eastern  demand  for  silver  falls  oif  it  is  a  mat- 
ter of  surprise,  and  some  explanation  is  to  be  sought  in 
exceptional  causes. 

§  3.  As  Europe  and  the  United  States  preferred  gold  to 
silver  when  the  former  metal  could  be  had,  the  market  for 
the  displaced  silver  in  the  East  was  naturally  of  essential  im- 
portance to  the  relative  values  of  the  two  precious  metals. 
We  have  seen  that  France  (Chart  XI)  had  expelled  about 
$345,000,000  of  silver  by  1864,  while  there  had  been  ex- 
ported to  the  East  from  Europe  no  less  than  $764,000,000 
in  the  same  period  ;  and  from  1852  to  1875  at  least  $1,000,- 
000,000  of  silver  had  been  shipped  from  England  and  Medi- 
terranean ports  to  India  and  the  East,  while  the  total  produc- 
tion of  silver  in  the  same  years  from  the  mines  had  not  been 
very  much  more  than  that  amount.^     The  general  movement 

'  See  Appendix  VI,  and  Appendix  I,  Table  B. 
10 


126  THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

of  silver  into  British  India  since  1852  may  be  seen  by  con- 
sulting Cliart  XII.  Before  1855  tbe  net  imports  of  silver 
into  India  averaged  only  about  $9,000,000,  while  the  annual 
production  of  silver  averaged  about  $30,000,000  a  year. 

From  1855  to  1862  the  imports  of  silver  increased.  Dur- 
ing this  period  occurred  the  Sepoy  mutiny,^  the  transfer  of 
the  Indian  Government  from  the  East  India  Company  to  the 
Crown,  the  borrowing  ^  of  large  sums  of  money  for  India  in 
England,  and  the  extensive  building  of  public  works.  These 
events  rendered  necessary  large  remittances  to  India,  and  a 
demand  was  therefore  felt  for  silver  for  shipment. 

These  conditions  were  materially  affected  by  the  "  cotton 
famine  "  in  England,  which  began  after  the  cessation  of  cot- 
ton shipments  to  Europe  from  the  United  States  during  our 
Civil  War.  India  was  pushed  to  supply  the  demand  for  cotton 
in  these  years,  and  this  created  an  abnormal  excess  of  payments 
to  India  in  the  international  exchanges,  which  of  course  led  to 
larger  shipments  of  silver  than  ever.  This  effect  lasted  from 
1861  to  1866.  Large  exports  of  gold  were  made  from  Lon- 
don to  the  Continent  in  order  to  purchase  the  silver  which 
English  merchants  needed  for  Indian  remittances ;  and  silver 
was  also  shipped  directly  from  France  to  the  East  in  large  sums. 

In  1867  a  diminution  was  clearly  marked  in  the  flow  of 
silver  to  the  East,  which  continued  at  a  less  sum  until  18Y6.^ 
This  was  due  to  the  use  of  bills  of  exchange  sold  by  the 
India  Council,  the  Government  of  India  residing  in  London, 
and  called  "council  bills."  India  had  been  borrowing  on 
a  large  scale.  The  departments  in  India  were  required  to 
raise  funds  there  with  which  to  pay  the  interest  on  her 
debt,  on  railway  loans,  pensions,  etc.,  to  a  sum  which  in 
1876  amounted  to  about  $75,000,000  a  year.  Kow,  if  this 
sum  was  due  from  India  to  the  India  Council  in  London,  the 

»  Broke  out  May  4,  185Y,  and  ended  July,  1859. 

^  Between  1850  and  1873  India  borrowed  164^  millions  sterling,  which  must 
be  repaid  in  gold.  The  interest  also  must  be  paid  in  gold.  This  is  the  chief 
difficulty  of  India,  arising  from  the  fall  of  silver,  since  more  silver  is  required 
to  pay  the  same  amount  as  before  in  gold. 

3  The  increase  in  1868  was  due  to  payments  for  the  Abyssinian  "War. 


CHART  XII. 


SURPLUS  OF  IMPORTS  OVER  EXPORTS  OF  GOLD  AND 

SILVER  INTO  BRITISH  INDIA,  1855-1882. 

- 

15. 

15. 

120 

15.5 

,-*■■"*"-- 

15.5 

rf 

^~~> 

16. 

16. 

?90 

17. 

^ 

17. 

o 

H 

\a 

t 

o 

\' '' 

m 

s 
I  70 

560 

18. 
18.5 

F  GOLD  TO   SI 

A 

V   \ 

'^•. 

o 

8 

18. 

< 

/  V 

S 

°50 

19. 

/     A 

19. 

z 

n\ 

A 

30 

20. 

, 

f 

lA 

^ 

A   A 

l\h 

/ 

20. 

10 

21. 

i 

J 

\ 

M 

f 

21. 

1862-3 
63-4 
64-5 
65-6 
66  7 
57-« 
58-9 

59-60 

1860-1 
61-2 
62-3 
634 
61-6 
65-6 
66-7 
67-8 
68-9 
69-70 

1870-1 
71-2 
72-3 
73-4 
74-5 

76-7 
77-8 
78-9 
79-80 
1880-1 
81-2 

INDIA  AND  THE  EAST. 


12T 


latter  would  sell  their  claims  to  this  money  in  India  by  go- 
ing into  the  London  market  with  bills  of  exchange  drawn  on 
Calcutta  or  Bombay.  Inasmuch  as  the  Indian  presidencies 
collect  all  their  revenues  in  silver,  these  bills  of  exchange 
were  claims  only  to  certain  sums  of  silver,  and  would  natu- 
rally be  bought  by  any  one  wishing  to  make  payments  in 
silver  in  India  for  goods  brought  from  that  country.  It 
must  be  apparent,  therefore,  that  just  as  the  expenses  of  the 
Indian  Government  rose,  and  just  in  proportion  to  the  num- 
ber of  council  bills  which  were  offered  for  sale  in  London, 
would  the  exportation  of  silver  to  India  be  saved.  The 
amount  of  silver  due  from  India  counterbalanced  an  equal 
amount  due  to  India ;  and  the  two  sums  were  offset  against 
each  other  by  the  use  of  bills  of  exchange.  The  number  of 
council  bills  rapidly  increased  about  1872,'  as  may  be  seen 
by  the  following  figures : 


Treasure. 

BillB. 

1868-1869  to  1871-1872 

$200,000,000 
82,500,000 

$147,500,000 
252,500,000 

1872-1873  to  1875-1876 

Annual  averai^e,  first  period 

50,000,000 
20,500,000 
15,500,000 

37,000,000 
63,000,000 
62,000,000 

"           "        second  period 

In  1875-1876 

The  fall,  therefore,  in  the  line  of  Chart  XII  from  1871  to 
1876,  showing  a  decline  in  shipments  of  silver  to  India,  is 
due  to  the  increase  of  payments  from  India  to  London  as 
manifested  in  the  form  of  an  increased  supply  of  council 
bills  on  the  London  market.  A  merchant  having  a  debt  to 
pay  in  India  would  buy  either  silver  or  a  council  bill,  accord- 
ing as  he  could  buy  one  or  the  other  cheapest. 

The  rise  in  the  imports  of  silver  into  India  in  1876  was 
thus  explained  by  Mr.  Bagehot :  ^  "  A  merchant  in  London, 
who  is  thinking  of  importing  goods  from  the  East,  looks  at 
the  price-current  in  Calcutta,  and  he  sees  the  price  quoted 
in  rupees.  The  merchant  in  London  is  in  possession  of  sover- 
eigns in  London ;  therefore  he  has  two  operations  :  first,  he 


»  "U.  C.  Report  of  1876,"  p.  33. 


2  "  H.  C.  Report  of  1876,"  Q.  1,368. 


128     THE  LATE  FALL  IX  THE  VALUE  OF  SILVER. 

has  to  buy  his  rupees  in  India ;  next,  with  those  rupees  he 
has  to  buy  the  article  which  he  saw  in  the  price-current. 
The  question  of  profit  and  loss  to  him  is  compounded  of  the 
result  of  these  two  operations ;  if,  therefore,  he  can  buy  his 
rupees  in  Calcutta  on  more  favorable  terms,  he  will  find  it 
to  his  interest  to  go  into  a  speculation  which  would  not 
otherwise  be  profitable.  If  he  can  get  rupees  at  Is.  8d.  in- 
stead of  2.S.,  and  lie  can  buy  his  goods  in  Calcutta  with  the 
same  number  of  rupees,  that  is  so  much  extra  gain  to  him. 
Conversely,  the  English  exporter  of  goods  to  the  East  will 
receive  payment  in  rupees,  and  he  will  have  to  sell  those 
rupees  ;  and  if  he  sells  them  for  a  less  amount  of  sovereigns, 
he  will  suffer  a  loss,  and  that  is  a  discouragement  to  export- 
ing from  this  country  to  India.  The  result  of  these  two 
operations — of  the  encouragement  of  exports  from  India  to 
this  country,  and  the  discouragement  of  exports  hence  to 
India — necessarily  is  an  increase  of  the  balance  which  this 
country  has  to  pay  to  India,  and  consequently  a  flow  of  sil- 
ver to  the  East."  The  increasing  exports  of  silver  in  1876- 
1878,  therefore,  were  a  consequence  of  the  fall  in  silver. 

§  4:.  The  conclusions  reached  by  the  Government  of  In- 
dia in  regard  to  this  movement  of  silver  are  as  follows :  ^ 

"  The  large  imports  of  treasure  into  India  since  1850  are 
due  to  abnormal  circumstances,  as  follows  : 

"  (1)  The  Crimean  War  transferred  to  India  large  demands 
for  produce  heretofore  obtained  from  Russia. 

"  (2)  The  American  Civil  War  exaggerated  temporarily 
the  value  of  Indian  cotton. 

"  (3)  Great  sums  of  money  have  been  borrowed  for  : 

(a)  The  suppression  of  the  mutiny  ; 

(b)  The  construction  of  railroads  (guaranteed  and 

state)  and  canals  ; 

(c)  The  Bengal  famine. 

"  It  would  be  altogether  misleading  to  treat  the  great  im- 
ports of  treasure  in  the  last  twenty-five  years  as  normal,  or  to 
expect  that  they  will  or  can  continue.  There  is,  therefore,  no 
reason  to  expect  that  silver  will  be  poured  into  India,  although, 

'  Dated  September  22,  1876,  and  issued  in  the  form  of  a  resolution  upon 
the  suggestions  of  the  Bengal  Chamber  of  Commerce  and  the  Calcutta  Trades 
Association,     See  "  Report  of  1878,"  pp.  411,  412. 


INDIA  AND  THE  EAST.  129 

of  course,  if  it  falls  in  value  a  greater  weight  of  it  must  come 
to  represent  the  same  value." 

In  an  earlier  part  of  the  chapter  we  have  seen  that  two 
strong  reasons  existed  for  the  continuance  of  the  Indian  de- 
mand for  silver :  the  passion  for  ornament,  and  the  need  of 
an  adequate  medium  of  exchange  for  a  population  of  237,- 
000,000.  With  respect  to  the  former  it  is  clear  that  any 
change  must  necessarily  be  slow,  and  that  the  desire  for  deco- 
ration can  be  subdued  only  by  the  gradual  progress  of  the 
race  in  civilization. 

"  The  same  passion  for  ornaments  [as  in  savage  races]  is  a 
powerful  instinct  amongst  the  native  races  of  Hindostan,  with 
whom  they  serve  at  once  as  a  mode  of  investment  and  a  means 
of  decoration  ;  but  as  civilization  makes  progress,  tastes  of  a 
different  order  are  developed.  Vanity,  perhaps,  loses  nothing 
of  its  power,  but  it  exhibits  itself  under  a  different  guise  and 
is  directed  to  different  objects.  Luxury,  in  its  modes  of  dis- 
play, as  in  other  respects,  undergoes  refinement,  and  mankind 
seeks  enjoyment  less  in  the  gratification  of  external  sense  and 
more  in  the  cultivation  of  the  higher  faculties.  The  superflu- 
ous expenditure  of  a  nation  advancing  in  civilization  is  accord- 
ingly devoted  less  and  less  to  objects  which  absorb  mere  masses 
of  gold  and  silver  and  more  and  more  to  jDurposes  of  a  higher 
order — to  the  beautifying  of  its  domains,  the  embellishing  of 
its  houses,  the  general  cultivation  of  its  tastes  ;  and  parks  and 
mansions,  pictures,  sculpture,  and  books  take  the  place  of  ac- 
cumulations of  plate  and  collections  of  jewelry."  * 

For  a  long  time  to  come,  however,  we  must  believe  that 
silver  and  gold  will  be  used  by  the  people  of  Hindostan  for 
ornaments. 

In  regard  to  the  second  reason — the  need  of  a  medium  of 
exchange — all  information  leads  us  to  suppose  that  compara- 
tively little  silver  is  in  use  as  money,  that  conditions  of  bar- 
ter still  exist  over  great  areas,  and  that  the  districts  where 
money  is  used  can  employ  a  much  greater  amount.  Yet 
even  in  this  matter  the  economizing  expedients  of  Western 
nations  must  aid  in  preventing  the  whole  demand  for  money 
from  falling  on  gold  and  silver  alone. 

"  In  India,  though  more  than  a  century  under  British  rule, 
the  advantages  of  credit  as  a  medium  of  exchange  are  only  be- 

'  Caimes,  "  Essajs  in  Political  Economy,"  p.  133. 


130 


THE  LATE  FALL  IN  THE  VALUE  OF  SILVER, 


ginning  to  be  understood.  The  circulation  of  bank-notes  is 
exceedingly  limited,  and  is  still  confined  to  some  of  the  Presi- 
dency towns.  Checks,  by  which  so  large  a  portion  of  the 
business  of  this  country  is  carried  on,  are  but  slightly  used, 
and  the  great  mass  of  transactions  is  effected  by  a  transfer  of 
rupees  bodily  in  every  sale.  The  magnitude  of  the  transactions 
conducted  in  this  manner  may  be  estimated  by  the  fact  stated 
by  Sir  Charles  Napier,  that  the  escort  of  treasure  constituted 
one  of  the  severest  duties  of  the  late  Bengal  army,  from  20,000 
to  30,000  men  being  constantly  occupied  in  this  manner.  The 
quantity  of  the  precious  metals  employed  in  thus  carrying  on 
the  internal  traffic  of  India  has  been  variously  estimated  be- 
tween 150,000,000?.  and  300,000,000/.  sterling  ;  but  this  state  of 
things  is  evidently  not  destined  to  be  of  long  continuance.  Mr. 
Wilson's  recent  minute  gives  grounds  for  believing  that  the 
Indian  Government  are  alive  to  this  subject,  and  that  India 
will  soon  enjoy  the  advantages  of  an  effective  paper  system. 
Such  an  event  can  not  fail  to  be  attended  with  important  con- 
sequences on  the  trade  and  industry  of  that  country  ;  and 
among  these  consequences  we  may  expect  this  :  that,  instead  of 
requiring,  as  now,  continuous  large  additions  to  her  present 
enormous  stock  of  metallic  money,  she  will  not  only  be  enabled 
to  dispense  with  these,  but  will  find  it  for  her  interest  to  part 
with  a  large  portion  of  what  she  now  employs."  ' 

A  system  of  paper  money  was  inaugurated  Marcli  1, 
1862,  and  it  is  quite  likely  that,  in  proportion  as  banking  ac- 
commodations are  extended  in  India,  there  will  be  some 
check  to  the  absorption  of  sil- 
ver,— ^but  of  that  sum  only 
which  would  have  been  used  as 
a  medium  of  exchange  and  not 
for  ornament.  The  reserve  of 
more  than  50  per  cent  of  the 
circulation  is,  of  course,  large- 
ly of  silver ;  but  the  extent  to 
which  bank-notes  are  already 
in  use  may  be  seen  from  the 
annexed  table :  ^ 

§  5.  If  we  eliminate  the  exceptional  period  of  1861-1866, 
during  the  cotton  famine,  we  shall  find  that  there  is  a  proba- 

»  Cairnes,  ibid.,  pp.  127,  128. 

»  *'  French  Report  of  Mon.  Conf.  of  1881,"  ii,  p.  205. 


Notes  in 

Notes  in 

Year. 

circulation. 

Tear. 

circulation. 

1863 

$22-5 

1873 

$64-3 

1864 

25-5 

4 

54-5 

1866 

37-3 

5 

55-4 

1866 

36-9 

6 

56-0 

186V 

49-7 

7 

59-8 

1868 

51-5 

8 

75-2 

1869 

51-4 

9 

63-4 

1870 

56-5 

1880 

68-9 

1871 

51-7 

1 

71-6 

1872 

54-3 

INDIA  AND  THE  EAST.  131 

bility  of  continued  imports  of  silver  into  India  so  long  as 
the  demand  for  ornaments,  and  the  evident  need  of  a  medium 
of  exchange,  exists.  It  would  seem  to  me  that  for  a  very- 
considerable  time  banking  devices  will  not  much  offset  the 
need  of  silver  for  money  in  common  circulation.  For  some 
time  to  come  India  will  require  much  more  silver  than  she 
now  has  for  her  currency.  The  progress  of  banking  facili- 
ties, moreover,  implies  also  that  kind  of  growth  in  compre- 
hending the  uses  of  money  which  is  likely  to  bring  with  it  a 
change  from  barter  to  civilized  methods  of  exchange  in  re- 
moter districts,  and  thus  to  increase  the  need  of  silver  for  cir- 
culation, as  much  or  more  than  credit  devices  will  diminish  it. 
In  addition  to  all  this  it  must  be  remembered  that  at 
present  India  is  a  poor  country,  and  that  its  vast  resources 
have  not  yet  been  advantageously  worked.  If  India  begins 
to  grow  more  wheat  for  exportation  to  European  markets ; 
if,  with  the  growth  of  civilization,  new  methods  of  produc- 
tion come  into  vogue,  and  more  products  which  India  can 
send  abroad  are  brought  to  market ;  or  if  she  should  furnish 
herself  with  substitutes  for  goods  now  imported — then  India 
would,  in  the  terms  of  international  exchange,  have  due  to 
her  additional  sums  of  treasure  which  would  be  liquidated 
by  silver.  But  the  flow  of  specie  from  Europe  will,  on  the 
other  hand,  be  effectually  prevented  by  any  means  which 
will  offset  this  indebtedness  of  Europe  to  India.  One  offset 
has  had  an  influence  already,  and  drawn  considerable  atten- 
tion— it  is  the  debt  owed  by  India  to  Europe,  owing  to  the 
increased  expenses  of  government,  the  sums  due  England 
for  interest  on  her  debt,  and  other  expenditures.  This  influ- 
ence is  chiefly  apparent  by  the  amounts  of  India  council  bills 
placed  on  the  London  market.  The  following  table  will 
show  how  great  this  force  has  been  in  the  past,  and  the  ex- 
tent of  its  growth  to  1880.  The  column  containing  these 
figures  might  be  otherwise  defined  as  "sums  obtained  for 
bills  drawn  by  the  Court  of  Directors,  or  Secretary  of  State, 
on  the  several  governments  of  India."  The  column  giving 
the  excess  of  exports  of  merchandise  gives  the  means  of 


132 


THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 


knowing  how  India  pays  for  her  silver,  and  shows  to  what 
extent  she  has  drawn  for  silver  bejond  the  amounts  of  the 
council  bills  (which  serve  as  an  offset  to  the  sum  of  exports 
in  striking  the  international  balance).  Should  her  exports 
continue  to  increase  as  they  have  in  the  past — and  they  have 
increased  from  an  average  of  about  $125,000,000  in  1856  to 
about  $300,000,000  in  1880— India  will  be  enabled  to  buy 
more  silver  and  continue  her  absorption  of  the  cheaper 
metal.     [Sums  are  given  in  millions.] 


TEAE8. 

Excess  of  exports 

Council 

Net  imports  of 

Net  imports  of 

oyer  imports. 

bills  sold. 

silver. 

gold. 

1855-1856 

$45-5 

$7-4 

$41-0 

$12-5 

1856-185V 

56-0 

14-1 

65-4 

10-5 

1857-1858 

61-0 

3-1 

61-1 

13-9 

1858-1859 

40-5 

•1 

38  6 

22-1 

1859-1860 

18-5 

•02 

55-7 

21-5 

1860-1861 

47-5 

-004 

26-6 

21-2 

1861-1862 

70-0 

5-9 

45-4 

259 

1862-1863 

126-0 

33-2 

62-7 

34-2 

1863-1864 

1920 

44-9 

63-9 

44-5 

1864-1865 

199-5 

34-0 

50-4 

49-2 

1865-1866 

1795 

350 

93-3 

28-6 

1866-1867 

64-0 

28-1 

84-8 

19-2 

1867-1868 

76-0 

20-7 

27-9 

23-1 

1868-1869 

85-5 

18-5 

43-0 

25-8 

1869-1870 

98-0 

34-9 

36-6 

28-0 

1870-1871 

104-5 

42-2 

4-7 

11-4 

1871-1872 

155-5 

51-6 

32-5 

17-8 

1872-1873   

1170 

69-7 

3-5 

12-7 

1873-1874 

106-0 

66-4 

12-2 

6-9 

1874-1875 

100-5 

54-2 

23-2 

9-4 

1875-1876 

96-0 

61-9 

7-7 

7-7 

1876-1877 

117-5 

63-5 

36-0 

1-0 

1877-1878 

118-5 

50-7 

73-4 

25 

1878-1879 

115-5 

69-7 

19-8 

4-5 

1879-1880 

130-0 

76-3 

39-3 

8-7 

1880-1881 

.   •  •   • 

19-4 

18-3 

1881-1882 





26-9 

24-2 

$2520-5 

$886-3 

$1035-0 

$505-3 

In  considering  the  effects  of  the  Indian  demand  on  the 
value  of  silver,  an  examination  of  Chart  XII  reveals  the 
fact  that  the  value  of  silver  relatively  to  gold  did  not  show 
any  immediate  sensitiveness  to  a  falling  off  in  the  export  of 
silver  to  the  East.  From  1870  to  1875  there  had  been  a 
marked  decline  in  the  net  imports  of  silver  into  India ;  but 


INDIA  AND  THE  EAST.  133 

it  was  not  until  1872-1873  that  a  slight  downward  movement 
in  the  value  of  silver  was  apparent,  while  it  was  not  until 
1876  that  the  very  considerable  break  in  the  value  of  silver 
manifested  itself.  In  looking  forward  to  our  object  in  Part 
II,  which  is  to  study  the  causes  affecting  the  late  fall  in  the 
value  of  silver,  I  can  not  think  that  the  decline  of  the  Indian 
demand  has  been  so  strong  an  influence  in  depressing  the 
value  of  silver  as  it  has  been  supposed  to  be  by  many  writers. 
A  temporary  withdrawal  of  the  usual  demand  at  a  critical 
time  for  the  value  of  silver  no  doubt  had  a  greater  effect 
than  it  could  have  had  at  other  times.  An  increased  demand 
from  India,  to  the  extent  to  which  it  permanently  absorbs  a 
greater  quantity  of  silver,  would,  of  course,  help  to  ligliten  the 
influences  which  are  weighing  down  the  value  of  this  metal ; 
but  I  am  not  inclined  to  believe  that  the  flow  of  silver  to 
the  East  has  been  the  principal  factor  in  our  problem.^  What 
makes  me  think  that  the  Indian  demand  *  is  not  a  very  potent 

'  Writing  in  1860,  Mr.  Cairnes  said:  "We  are  aware  it  has  been  main- 
tained that  the  value  of  silver,  so  far  from  having  fallen,  has  really  risen  dur- 
ing the  last  few  years,  in  proof  of  which  we  are  referred  to  the  increased  de- 
mand for  it  for  Oriental  remittance.  That  silver  has  risen  in  its  ^oW-price 
owing  to  this  circumstance  we  admit,  but  we  deny  that  this  is  a  proof  of  a  rise 
in  its  value,  any  more  than  a  rise  in  the  gold-price  of  any  other  commodity 
would  prove  a  rise  in  its  value  at  a  time  when  the  supply  of  gold  was  rapidly 
increasing.  During  the  last  two  years  (1858  and  1859)  the  demand  for  silver 
in  the  East  has  been  affected  a  good  deal  by  requirements  connected  with  the 
Indian  Mutiny;  but,  if  we  investigate  the  causes  of  the  extraordinary  demand 
which  has  characterized  the  last  four  or  five  years,  we  shall  find  that  they  are  in  a 
principal  degree  traceable  to  the  increased  production  of  gold,  operating  through 
the  expenditure  of  enlarged  money  incomes  in  England  and  the  United  States  on 
Oriental  productions  ;  and  that  thus  the  increased  demand  for  silver,  which  is  al- 
leged as  a  proof  that  silver  has  risen  in  value,  is  in  reditu  a  consequence  of  the 
large  amount  of  gold  available  for  its  purchase." — "Essays,"  pp.  142,  143.  Mr. 
Cairnes  was  thus  of  the  opinion  that  the  imports  of  silver  after  1850  were  abnor- 
mal, and,  by  inference,would  decline  gradually  with  the  absorption  of  the  new  gold. 
"  The  coinage  of  silver  in  India  was,  in 

1877 831,355,000 

1878 80,900,000 

1879 36,050,000 

1880  (estimated) 50,000,000 

$198,305,000 
See  speech  of  Sir  Louis  Mallet,  "French  Report  of  Conf.  of  1881,"  i,  p.  173. 


134:  THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

influence  in  maintaining  tlie  general  value  of  silver  is  tlie 
slierlit  influence  of  its  increased  demand  from  1877-1 8Y9  in 
raising  the  value. 

The  total  production  of  gold  from  1850  to  1876  was  about 
$3,000,000,000 ;  of  silver,  about  $1,200,000,000.  Thus  far 
we  have  seen  that  France  added  about  $350,000,000  of 
silver  to  the  supply,  and  that  India  took  somewhat  more  than 
$1,000,000,000.  Of  the  new  gold,  France  in  the  same  time 
coined  about  $1,160,000,000,  and  India  imported  $410,000,- 
000,  leaving  about  $1,400,000,000  of  gold  to  be  accounted 
for.  Not  all  the  excess  of  the  j)roduction  of  gold  over  the 
former  average  production  was  absorbed  by  the  action  of 
France  and  India.  Making  large  allowances  for  consumption 
in  the  arts,  and  for  increase  in  their  currencies  by  gold-using 
countries,  a  very  large  part  of  this  $1,400,000,000  of  gold  re- 
mains as  a  potent,  and,  to  my  mind,  the  chief  factor  in  bring- 
ing about  a  disturbance  in  the  relative  values  of  gold  and  sil- 
ver. The  absorption  of  gold  by  France  from  1853  to  1865 
limited  the  demand  for  silver  in  its  function  as  a  medium  of 
exchange.  If  the  still  remaining  quantity  of  gold  tempts  some 
other  country  to  take  advantage  of  the  abundant  gold  supply 
to  improve  its  currency  by  taking  the  better  medium  instead 
of  the  poorer — that  is,  the  gold  instead  of  the  silver  (we  are 
speaking  of  the  preference  for  gold  whenever  choice  between 
gold  and  silver  is  j)ossible) — then  we  shall  see  the  field  for 
the  employment  of  silver  still  further  contracted,  and  the  de- 
mand for  silver  withdrawn,  because  the  needs  of  the  com- 
munity are  better  served  by  the  other  metal  which  the  prodi- 
gality of  nature  has  poured  upon  the  world  since  1850.  In 
the  next  chapter  we  shall  see  how,  in  consonance  with  this 
supposition,  the  new  gold  usurped  the  place  of  silver  in  an- 
other country,  and  left  the  latter  to  find  a  sale  in  a  market 
already  somewhat  sated  by  a  full  supply. 


CHAPTER  X. 

GERMANY    DISPLACES    SILVER    WITH    GOLD. 

§  1.  The  movement  inaugurated  by  the  United  States 
and  France — both  of  which  countries  accepted  with  compla- 
cency the  substitution  of  gold  for  silver — was  assisted  by 
Germany.  Seeing  the  great  commercial  nations  of  the  West 
taking  heed  of  the  opportunity  to  provide  themselves  with 
gold,  Germany  was  shrewd  enough  to  seize  her  opportunity 
before  it  was  too  late.  Had  she  not  done  so,  she  would  have 
but  offered  to  her  rival,  France,  the  occasion  to  do  the  same 
thing — the  thing  which  France  would  to-day  most  willing- 
ly do  if  it  were  possible  for  her  to  do  it.  As  we  have 
seen,  France  and  India  had  not  absorbed  more  than  about 
one  half  of  the  new  gold.  Probably  $1,500,000,000  of  the 
gold  produced  from  1850  to  1876  was  yet  to  find  a  demand 
either  in  the  arts  or  in  the  currencies  of  other  nations.  It 
was  from  this  source  that  Germany  proposed  to  help  herself 
before  it  was  too  late,  and  thereby  array  herself  in  the  rank 
of  commercial  states  which,  having  large  transactions,  chose 
gold,  not  merely  as  the  most  stable  in  value  of  the  two  met- 
als, but  as  the  best  medium  of  exchange  for  large  payments. 
Here,  again,  we  meet  with  the  undoubted  preference  for 
gold  over  silver.  ISTo  matter  what  the  cause  is,  the  simple  his- 
torical fact  is  undeniable  that  among  commercial  nations  most 
men  concur  in  believing  gold  to  be  the  most  stable  in  value, 
and  the  most  convenient  and  trustworthy  of  the  two  metals 
as  a  medium  of  exchange.  We  will  not  say  that  this  is  an 
unmixed  good ;  but  so  it  is,  as  a  fact  of  modem  history.     If 


136  THE  LATE  FALL  IN   THE  VALUE   OF  SILVER. 

any  modern  commercial  country  were  placed  in  a  position 
where  it  could  choose  on  even  terms  (or  even  at  some  sacri- 
fice) between  gold  and  silver,  there  is  no  more  doubt  that 
gold  would  be  preferred  than  there  is  that  of  two  pieces  of 
land  a  fanner  would  select  for  cultivation  the  one  which 
(other  things  being  equal)  was  the  more  fertile  and  accessible. 
Germany,  consequently,  saw  an  opportunity  to  secure  gold 
instead  of  silver,  and  was  far-sighted  enough  to  understand 
that,  if  other  countries  were  permitted  to  anticipate  her  in  the 
course  of  monetary  progress,  the  acquisition  of  gold  necessary 
to  the  up-building  of  a  great  commercial  state  with  large  trans- 
actions might  later  on  possibly  become  a  more  costly  proceed- 
ing. At  the  close  of  the  Franco-Prussian  war  the  new  German 
Empire  found  the  opportunity  referred  to  in  the  plan  for  the 
establishment  of  a  uniform  coinage  throughout  its  numerous 
small  states,  and  was  essentially  aided  in  its  plan  at  this  time 
by  the  receipt  of  the  enormous  war-indemnity  from  France, 
of  which  $54,600,000  was  paid  to  Germany  in  French  gold 
coin.^  Besides  this,  Germany  received  from  France  bills  of 
exchange  in  payment  of  the  indemnity  which  gave  Germany 
the  title  to  gold  in  places,  such  as  London,  on  which  the 
bills  were  drawn.  Gold  in  this  way  left  London  for  Ber- 
lin. With  a  large  stock  of  gold  on  hand,  Germany  began 
a  series  of  measures  to  change  her  circulation  from  silver  to 
gold.  Her  circulation  in  1870,  before  the  change  was  made, 
was  composed  substantially  of  silver  and  paper  money,  with 
no  more  than  4  per  cent  of  the  whole  circulation  in  gold,  as 
may  be  seen  by  the  following  statement :  ^ 

Domestic  gold  coins 91,000,000  marks.  4*0  per  cent. 

Silver  coins  ^ 1,500,000,000      "  65-7         " 

Subsidiary  coins 85,000,000      "  Z'l 

'  See  Leon  Say's  "  Rapport  fait  au  nom  de  la  commission  du  budget  de  1875 
sur  le  payement  de  I'indemnite  de  guerre." 

"  Dr.  A.  Soetbeer,  "  Gegenwartiger  Stand  der  Wahrungsfrage  und  die  Zu- 
kunft  des  Silbers"  (April,  1885),  p.  36;  also  in  "Viertjahrs.  fur  Volkswirt.," 
xxii,  Heft  ii. 

»  Thia  item  includes  90,000,000  marks  of  the  Prussian  "War  Treasure  and  the 


GERMANY   DISPLACES  SILVER  WITH  GOLD.  137 

Foreign  coins 40,000,000  marks 

Hamburg  bank-funds 36,000,000 


1, 75  2,000,000 

State  paper-money 171,000,000 

Uncovered  bank-notes 359,000,000 


arks.            1-8 

per 

cent. 

"                  1-6 

"               76-8 

7-5 

"                15-7 

"            inn-n 

Total 2,282,000,000 

Bj  this  it  will  be  seen  that  in  ISTO  Germany  had  but 
$22,750,000  of  gold  in  circulation,  and  as  much  as  $375,- 
000,000  of  silver  possessing  full  legal-tender  power.  The 
sales  of  silver  by  Germany  were  generally  believed  to  have 
been  responsible  for  the  fall  in  the  value  of  silver  in  1876. 
I  do  not  think  that  this  can  be  substantiated  by  a  study 
of  the  chronological  order  of  events  affecting  the  value  of  sil- 
ver, which  will  be  made  in  another  place.^  But  for  the 
present,  it  will  be  well  first  to  describe  the  measures  by  which 
Germany  carried  through  the  reform  of  her  coinage. 

§  2.  The  substitution  of  gold  instead  of  silver  in  a  coun- 
try like  Germany  which  had  a  single  silver  medium  was  car- 
ried out  by  a  path  which  led  first  to  temporary  bimetallism 
and  later  to  gold  monometallism.  And  for  this  purpose  the 
preparatory  measures  ^  were  passed  December  4,  1871 : 

"  Sec.  1.  There  shall  be  coined  an  imperial  gold  coin,  139| 
pieces  of  which  shall  contain  one  pound  of  pure  gold. 

"  Skc.  2.  The  tenth  of  this  gold  coin  shall  be  called  a 
*  mark,'  and  shall  be  divided  into  one  hundred  'pfennige.' 

"  Sec.  3.  Besides  the  imperial  gold  coin  of  10  marks  (Sec.  1), 
there  shall  be  coined  imperial  gold  coins  of  20  marks,  of  which 
69f  pieces  shall  contain  one  pound  of  pure  gold. 

"  Sec.  4.  The  alloy  of  the  imperial  gold  coins  shall  consist  of 
900  thousandths  parts  gold  and  100  thousandths  parts  copper. 
Therefore  125-55  pieces  of  10  marks,  62*775  pieces  of  20  marks, 
shall  each  weigh  one  pound. 

"  Sec  6.  tliitil  the  enactment  of  a  Imo  for  the  redemption  of 
the  large  silver  coins,  the  making  of  the  gold  coins  shall  be 
conducted  at  the  expense  of  the  Empire.  .  .  . 

Austrian  thalers  current  in  Germany.  The  item  does  not  include  the  coins  of 
Alsace  and  Lorraine. 

'  Chapter  xii,  §  3. 

"  For  the  full  text  of  these  laws,  as  well  as  for  the  French  law,  see  Appendix 
III,  C. 


138  THE   LATE  FALL  IN  THE  VALUE   OF  SILVER. 

"  Sec.  8.  All  payments  which  are  by  law  to  be  made,  or  which 
may  be  made,  in  silver  coins  of  the  thaler  system,  of  the  South 
German  system,  of  the  Lubec  or  Hamburg  current  system,  or 
in  gold  thalers  of  the  Bremen  system,  can  be  made  in  imperial 
gold  coins  (Sees.  1  and  3)  in  such  manner  as  to  count  the  10- 
mark  piece  equal  in  value  to  3^  thalers,  or  5  florins  50  kreutzers 
of  the  South  German  system,  8  marks  5^  schillings  of  the 
Lubec  or  Hamburg  current  system,  3^3  gold  thalers  of  the 
Bremen  system.  .  .  . 

"  Sec.  10.  No  coinage  of  gold  coins  other  than  those  estab- 
lished by  this  law,  nor  of  large  silver  coins,  the  coinage  of 
medals  excepted,  shall  take  place  until  further  action." 

This  law  of  1871  created  new  gold  coins,  current  equally 
with  existing  silver  coins,  at  rates  of  exchange  which  were 
based  on  a  ratio  ^  between  the  gold  and  silver  coins  of  1 :  15^. 
Tlie  silver  coins  were  not  demonetized  by  this  law ;  their  coin- 
age was  for  the  present  only  discontinued ;  but  there  was  no 
doubt  as  to  the  intention  of  the  Government  in  the  future, 
since  in  Section  6  reference  was  distinctly  made  to  further  ac- 
tion looking  to  Ibe  withdrawal  and  permanent  retirement  of 
large  silver  pieces.  Therefore,  so  far  as  Germany  had  had  an 
annual  demand  for  silver  hitherto  to  replenish  her  currency, 
that  demand  ceased  with  the  end  of  the  year  1871.  Exist- 
ing silver  coins  still  remained  a  legal  tender  equally  with 
gold  in  a  bimetallic  system  based  on  a  ratio  of  1 :  15^. 

The  next  and  decisive  step  toward  a  single  gold  standard 
was  taken  by  the  act  of  July  9,  1873 : 

"  Sec.  1.  In  place  of  the  various  local  standards  now  current 
in  Germany,  a  national  gold  standard  will  be  established.  Its 
monetary  unit  is  the  '  mark,'  as  established  in  Sec.  2  of  the  law 
dated  December  4,  1871.  .  .  .  [Five-mark  gold  coins  were 
authorized,  in  addition  to  gold  coins  authorized  by  the  act  of 
1871.] 

"  Sec.  3.  There  shall  be  issued  in  addition  to  the  national 
gold  coins :  1.  As  silver  coins,  five-mark  pieces,  two  -  mark 
pieces,  one-mark  pieces,  fifty-pfennig  pieces,  and  twenty-pfen- 
nig pieces.     [Copper  and  nickel  coins  were  also  established.] 

"  P.  1.  The  pound  of  fine  silver  shall  produce  at  coinage 

'  The  price  of  silver  in  IStl  in  London  was  60|<?.,  equal  to  a  ratio  of 
1:  15-68. 


GERMANY  DISPLACES  SILVER  WITH  GOLD.  139 

twenty  five-mark  pieces,  fifty  two-mark  pieces,  etc.  .  .  .  The 
proportion  of  alloy  is  100  parts  of  copper  to  900  parts  of  silver, 
so  that  90  marks  in  silver  coin  shall  weigh  one  pound.  .  .  . 

"  Sec.  4.  The  aggregate  issue  of  silver  coins  shall,  until  fur- 
ther orders,  not  exceed  ten  marks  for  each  inhabitant  of  the  Em- 
pire. At  each  issue  of  these  coins  a  quantity  of  the  present 
silver  coins  equal  in  value  to  the  new  issue  must  be  withdrawn 
from  circulation,  and  first  those  of  the  'thirty-thaler'  stand- 
ard.* 

"  Sec.  9.  No  person  shall  be  compelled  to  take  in  payment 
national  silver  coins  to  a  larger  amount  than  twenty  marks, 
and  nickel  and  copper  coins  to  a  larger  amount  than  one  mark. 
The  Federal  Council  will  designate  such  deiDositories  as  will 
disburse  national  gold  coins  in  exchange  for  silver  coins  in 
amounts  of  at  least  200  marks,  and  of  nickel  and  copper  coins 
in  amounts  of  at  least  50  marks,  upon  demand. 

"  Sec.  14.  P.  1.  All  payments  to  be  made  up  to  that  time  [the 
introduction  of  the  national  standard]  in  coins  now  current,  or 
in  foreign  coins  lawfully  equalized  with  such  domestic  coins, 
are  then  to  be  made  in  national  coins.  .  .  . 

"  Sec.  18.  By  January  1, 1876,  all  bank-notes  not  issued  ac- 
cording to  the  national  standard  must  be  withdrawn. 

"  From  that  date  only  bank-notes  issued  according  to  the 
national  standard,  and  in  denominations  of  not  less  than  100 
marks,  may  be  emitted  and  kept  in  circulation.  These  provis- 
ions also  apply  to  bills  hitherto  issued  by  corporations."  .  .  . 

By  this  measure  gold  was  established  as  the  monetary 
standard  of  the  country,  with  the  "  mark  "  as  the  unit,  and 
silver  was  used,  as  in  the  United  States  in  1853,  in  a  sub- 
sidiary service.  Before  this  change,  when  silver  was  coined 
at  its  full  weight,  90  marks  were  coined  from  one  pound  of 
fine  silver.  By  the  law  of  1873,  100  marks  were  coined 
from  one  pound  of  fine  silver.  One  hundred  coins  having 
been  issued  where  90  had  been  before,  there  was  an  over- 
valuation of  ^  in  the  new  imperial  silver  currency,  or,  in 
other  words,  silver  coins  were  issued  ^  below  their  nominal 
value,  or  11-^  per  cent.  The  subsidiary  coinage,  as  in  the 
United  States,  contains  less  silver  than  its  nominal  or  tale 
value  expresses ;  but  its  legal-tender  value  was  limited  to 
20  marks  (five  dollars),  and  it  was  redeemable  at  govern- 

'  By  the  treaty  between  Austria  and  the  German  States  in  185*7,  a  pound  of 
fine  silver  was  coined  into  30  thalers. 


140  THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

ment  depositories.  The  silver  coin,  therefore,  was  regulated 
bj  the  usual  principles  governing  subsidiary  coinage,  Ger- 
many thus  following  in  the  steps  of  the  United  States  and 
of  England, 

The  act  also  limited  the  amount  of  the  overvalued  silver 
to  ten  marks  for  each  inhabitant  of  the  Empire,  a  compara- 
tively low  figure.  It  will  be  evident  tliat  this  fact  is  to  be 
kept  in  mind  in  considering  the  total  amount  of  silver  liber- 
ated by  Germany,  since  the  amount  of  the  new  silver  coined 
and  issued  was  an  offset  to  the  total  amount  withdrawn ;  that 
is,  not  all  the  silver  drawn  in  was  sold,  since  some  of  it  was 
recoined  and  issued  in  the  new  form. 

The  reform  in  the  gold  and  silver  coinage  was  accom- 
panied by  measures  affecting  the  bank-notes  and  j)aper  money 
in  circulation.  The  issues  of  the  various  small  states  were 
withdrawn  and  a  new  paper  money  issued,  distributed  ac- 
cording to  population  among  the  various  states,  and  redeem- 
able in  the  new  imperial  currency.  The  inconvenience  of 
the  heavy  silver  in  use  in  Germany  had  formerly  stimulated 
the  use  of  substitutes  for  specie  in  the  form  of  bank-notes. 
The  act  of  1873  regulated  the  issues  of  the  banks,  and  bank- 
notes of  a  denomination  less  than  100  marks  ($25)  were  for- 
bidden. This  was  an  important  measure,  because  it  opened 
a  new  demand  for  silver  to  take  the  place  of  the  prohibited 
bank-notes.  If  no  notes  were  issued  under  100  marks,  more 
coin  would  be  needed  to  fill  the  vacancy  caused  by  their 
retirement. 

§  3.  Under  the  terms  of  this  legislation  Germany  began 
to  withdraw  her  old  silver  coinage,  and  to  sell  as  bullion 
whatever  silver  was  not  recoined  into  the  new  subsidiary  cur- 
rency. The  following  table  ^  will  show  the  amounts  of  silver 
sold  in  the  open  market  by  Germany,  and  the  price  at  which 
it  was  sold,  until  the  end  of  May,  1879,  when  sales  were  sus- 
pended : 

'  "French  Report  of  Mon.  Conf.  of  1881,"  i,  p.  16.     Marks  are  reduced  at 
the  rate  of  four  marks  to  one  dollar. 


GERMANY  DISPLACES  SILVER  WITH  GOLD. 


141 


TEARS. 

Pounds  flue  sliver. 

Price  per  Eng.  stand- 
ard oz.  at  wliicli  sold. 

Proceeds  of  sale. 

1873 

105-9  thousands. 

703-6          " 

214-9  " 
1,211-8  " 
2,868-1  " 
1,622-7          " 

377-7          " 

59A'^. 
58f    " 
57i    " 
52f    « 
54^" 
52tV" 
50      " 

$2,324,171 

1874 

15,283,918 

1875 

4,552,112 

1876 

23,484,120 

1877 

57,606,060 

1878 

31,550,963 

1879  (May) 

6,983,604 

Total 

7,104*8  thousands. 

53M" 

$141,784,948 

The  silver  withdrawn  by  the  end  of  the  year  1880  was 
7,474, eir-l  pounds  of  fine  silver  ^ ;  of  this  it  is  stated  that,  at 
the  end  of  1880,  there  remained  unsold  in  the  hands  of  the 
German  Government  339,353  pounds  of  fine  silver.  Ger- 
many was  interrupted  in  her  sales  of  silver  by  the  decline  in 
the  value  of  silver  in  1874,  and  particularly  in  1876  ;  but  she 
adopted  the  policy  of  stopping  her  sales  when  the  price  of 
silver  was  low,  and  again  selling  when  the  price  rose.  It  will 
be  seen  by  the  table  given  above  that  the  largest  sales  were 
made  in  the  year  1877,  when  the  price  of  silver  was  much 
higher  than  it  had  been  in  1876.  In  May,  1879,  however, 
the  Government  suspended  all  further  sales  of  silver,  and  has 
not  resumed  them  to  the  present  time. 

It  has  been  thought  by  many  that  the  sales  of  silver  by 
Germany,  to  the  extent  of  the  new  supply  of  silver  which  was 
thrown  on  the  market,  had  been  the  cause  of  the  extraordi- 
nary fall  in  the  value  of  silver  in  1876.  It  was,  therefore, 
held  that  if  the  sales  of  silver  were  suspended,  the  price  should 
recover  something  of  its  former  height.  It  was  this  opin- 
ion which  led  the  managers  of  the  Imperial  Bank  of  Ger- 
many, in  whose  vaults  a  large  amount  of  the  old  thalers  had 
collected  and  had  not  yet  been  redeemed,  to  advise  the  cessa- 


*  1,080,486,138  marks  of  silver  coins  were  withdrawn;  382,648,841  marks 
were  used  in  the  recoinage;  the  remainder,  697,797,069  marks,  divided  by  90 
(the  number  of  marks  to  a  pound  under  the  old  system),  give  7,474,644  pounds. 
It  will  be  noticed,  however,  that  these  figures,  taken  from  the  "French  Report 
of  Mon.  Conf.  of  1881,"  i,  p.  16,  do  not  exactly  prove.  The  figures  in  this  "Re- 
port," already  referred  to,  are  unfortunately  marred  by  many  errors. 

11 


142     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

tion  of  further  sales  in  1879.  Their  advice  was  taken  ;  but 
the  price  of  silver  did  not  show  the  expected  buoyancy  after 
sales  were  suspended.  It  can  hardly  be  thought  now  that 
the  fall  of  silver,  which  has  continued  to  the  present  day, 
was  due  to  the  sales  of  Germany  which  ceased  in  1879. 

The  later  status  of  the  reform  in  the  gold  and  silver  coin- 
age will  make  our  statements  in  regard  to  1876  somewhat 
clearer.  We  have  the  advantage  of  ten  years  later  informa- 
tion' than  that  which  was  accessible  in  1876  to  either  the 
German  Government,  or  to  the  Committee  of  the  House  of 
Commons,  which  investigated  the  causes  of  the  depreciation 
of  silver  in  that  year : 

By  1880  old  silver  coins  withdrawn $270,000,000 

By  1880  new     "         "     coined 106,000,000 

Silver  to  be  disposed  of 164,000,000 

Silver  sold  to  May,  1879 141,000,000 

Supposed  amount  unsold,  1880 23,000,000 

Old  silver  coins  current  in  1 870 1375,000,000 

"       "        "      withdrawn  by  1880 270,000,000 

"      "        "      (thalers)  outstanding  by  1885 105,000,000 

The  population  by  1880  had  increased  to  45,191,172, 
making  the  amount  of  fractional  silver  which  can  legally 
be  issued  450,000,000  marks,  or  about  $113,000,000.  This 
would  absorb  $7,000,000  of  old  silver  coin  outstanding  and 
yet  to  be  withdrawn.  It  is  quite  likely,  moreover,  that  ten 
marks  per  head  will  not  prove  a  sufficient  allowance  for  the 
silver  medium.  A  rate  of  twelve  marks  per  head  is  already 
discussed.  Then  it  is  to  be  remembered  that  tlie  thaler  pieces 
yet  out  must  be  replaced  by  other  coinage. 

l^ow,  adding  to  $164,000,000  (which  was  the  amount  actu- 
ally to  be  sold  as  the  result  of  withdrawals  less  recoinage  to 
1880)  the  sum  of  thalers  yet  outstanding,  $105,000,000,  we 
get  as  a  maximum  about  $270,000,000  as  the  total  amount 

»  "'French  Report  of  Mon.  Conf.  of  1881,"  i,  p.  16 ;  and  Dr.  Soetbeer's  rari- 
ouB  writings,  particularly  the  one  already  referred  to,  "  Wahrungsfrage." 


GERMANY  DISPLACES  SILVER  WITH  GOLD.  143 

of  silver  whicli  Germany  could  throw  upon  the  market  as 
the  result  of  her  policy  of  displacing  silver  with  gold.^  I 
think  this  is  a  very  liberal  estimate,  and  yet  it  is  not  a  sum 
in  itself  to  which  a  very  extraordinary  revolution  in  the 
price  of  silver  can  be  attributed ;  the  less  so  because,  between 
1873  and  1885,  or  in  twelve  years,  only  $141,000,000  of  Ger- 
many's silver  have  actually  been  put  upon  the  market. 

But  inasmuch  as  our  object  in  Part  II  is  to  arrive  at  an 
explanation  of  the  causes  which  affected  the  price  of  silver  in 
1876  and  subsequent  years,  it  will  be  necessary  to  discover 
what  effect  German  demonetization  had  had  by  1876.  By 
that  year  Germany  had  sold  in  the  open  market  only  from 
$30,000,000  to  $35,000,000.  That  sum  represented  the  actu- 
al and  visible  addition  to  the  supply  of  silver  caused  by  the 
German  act  of  1873.  But  dealers  in  silver  bullion  must  al- 
ways take  into  consideration  more  than  the  actual  sales ;  they 
must  consider  also  the  potential  supply.  The  proper  theory 
of  market  value  has  regard  not  merely  to  the  actual  visible 
supply  present  and  offered  for  sale,  but  also  to  the  amount 
of  the  prospective  supply,  the  amount  which,  although  not  ac- 
tually present,  is  capable  of  being  brought  at  once  to  market. 
The  potential  supply,  therefore,  was  naturally  taken  into  ac- 
count by  dealers  in  silver,  and  estimates  as  to  its  amount  had 
an  important  influence  upon  the  price  of  silver.  But,  as 
given  above,  the  total  su23ply  of  silver  which  Germany  could 
by  all  her  operations  put  upon  the  market  was  about  $270,000,- 
000.  Subtracting  $30,000,000,  the  amount  actually  sold  by 
1876,  the  potential  supply  was  about  $240,000,000.  In  1876, 
however,  the  German  Government  underrated  the  quantity 
of  the  old  silver  still  to  be  withdrawn.  To  that  date  $110,- 
000,000  had  been  withdrawn,  leaving  about  $265,000,000 
still  outstanding.  In  1876  the  estimates  on  this  sum  varied 
from  $40,000,000  to  $150,000,000.  One  of  the  best  authori- 
ties ^  believed  that  the  face  value  of  the  coin  to  be  with- 

'  The  amount  withdrawn  from  1880  to  1885,  however,  must  be  added  to  this 
Bum. 

*  Mr.  G.  Pietsch,  manager  of  the  sales  of  silver  for  Germany  in  London.    See 


144  THE  LATE  FALL  IN  THE  VALUE   OF  SILVER. 

drawn  was  $195,000,000,  whicli  Dr.  Soetbeer  now  assures  us 
was  $375,000,000  in  1870. 

§  4.  At  tlie  same  time  that  Germany  was  liberating  silver 
she  was  absorbing  gold  in  her  new  coinage.  In  order  that  a 
comparison  may  be  made  between  the  condition  of  the  cur- 
rency in  Germany  under  the  old  silver  regime  and  the  pres- 
ent condition  under  the  new  coinage  system,  I  take  ^  from 
Dr.  Soetbeer  a  table,  corresponding  to  that  of  1870  before 
given,  which  will  show  the  progress  made  toward  a  gold 
standard  by  1885  : 

Imperial  gold  coins 1,500,000,000  marks  ) 

Gold  in  bars  and  foreign  coins 72,000,000      "      )  ^^'^  ^ 

Silver  thalers  (including  Austrian)..  450,000,000      "  14-7" 

Imperial  silver  coins 442,000,000       "  14-5  " 

Nickel  and  copper  coins 40,000,000       "  1-3  " 

2,604,000,000       "         82-1  " 

Imperial  treasury-notes 145,000,000       "  4-8  " 

Uncovered  bank-notes 401,000,000      "         13-1  " 

3,050,000,000       "       100-0  " 

It  will  be  seen  by  comparison  with  the  previous  statement 
for  1870  that  the  amounts  of  gold  and  silver  coins  in  1885  are 
almost  exactly  reversed.  In  1870  there  were  1,500,000,000 
marks  of  silver  ;  in  1885,  1,500,000,000  marks  of  gold  coin. 
But  the  substitution  of  the  new  for  the  old  silver  coins  has 
not  yet  been  finished,  since  450,000,000  marks  of  silver 
thalers  are  yet  to  be  withdrawn. 

The  coinage^  of  gold  in  Germany  from  1873  to  the  end 
of  1880  is  as  follows : 

20-mark  pieces $317'6  millions. 

lO-mark  pieces 112-2       " 

5-mark  pieces I'O       " 

Total $436-8       " 

"H.  C.  Report  of  1876,"  Questions  739-760.  The  estimate  of  one  third  for 
disappearance  on  the  amount  of  the  original  coinage  was  found  in  fact  to  be,  on 
an  average,  only  21  per  cent  for  three  kinds  of  coin. 

»  Ibid.,  p.  87. 

'  "  French  Report  Conf.  of  1881,"  i,  p.  15. 


GERMANY  DISPLACES  SILVER  WITH   GOLD.  145 

The  old  gold  coinage  of  about  $23,000,000  previously 
in  circulation  is  to  be  subtracted  from  the  total  coinage  of 
$437,000,000,  leaving  $414,000,000  as  the  probable  demand 
of  Germany  on  the  gold  stock  of  the  world.^  The  German 
demand  on  the  new  gold  which  resulted  from  the  discoveries 
in  California  and  Australia  then  amounted  to  $414,000,000 
to  a  date  as  late  as  1880.  With  the  $1,160,000,000  coined 
by  France,  and  the  $440,000,000  imported  by  India,  this 
makes  a  total  of  about  $2,000,000,000  taken  out  of  the  new 
supplies  of  gold  by  what  was  practically  a  new  demand  in 
these  three  countries.  I  include  in  Germany's  demand  the 
sums  absorbed  as  late  as  1880,  that  there  may  be  no  danger 
of  undervaluing  the  demand  for  gold,  although  our  immedi- 
ate purpose  confines  us  properly  to  the  period  ending  in 
1876.  There  is  thus  left  about  $1,000,000,000  of  the  pro- 
duction of  gold  from  1850  to  1876  to  be  accounted  for. 

Following  in  the  lead  of  Germany,  Denmark,  Norway, 
and  Sweden  changed  their  silver  circulation  to  gold,  but 
threw  upon  the  market  ^  only  about  $9,000,000  of  silver. 

'  From  ISYl  to  1876  gold  to  the  amount  of  $119,930,000  was  purchased  by 
the  German  Government  in  London  ("  H.  C.  Report  of  1876,"  Q.  325) ;  $50,000,- 
000  of  gold  came  from  France  in  the  War  Indemnity ;  and  other  amounts  came 
from  France,  Belgium,  and  Russia. 

»  See  "  H.  C.  Report,"  p.  30. 


CHAPTER  XL 

FEANCE   AND   THE    LATEST   UNION. 

§  1.  The  gold  discoveries  of  California  and  Australia 
were  directly  tlie  cause  of  the  Latin  Union.  It  will  be  re- 
membered that  in  1853,  when  the  subsidiary  silver  of  the 
United  States  had  disappeared  before  the  cheapened  gold,  we 
reduced  the  quantity  of  silver  in  the  small  coins  sufficient- 
ly to  keep  them  dollar  for  dollar  below  the  value  of  gold. 
Switzerland  followed  this  example  of  the  United  States  in 
her  law  of  January  31,  1860;  but,  instead  of  distinctly  re- 
ducing the  weight  of  pure  silver  in  her  small  coins,  slie 
accomplished  the  same  end  by  lowering  the  fineness  of  stand- 
ard for  these  coins  to  800  thousandths  fine.  This,  of  course, 
only  amounted  to  the  same  thing  as  a  reduction  of  weight ; 
since  if,  without  altering  the  standard  weight  of  a  coin,  more 
alloy  is  used  (as,  in  this  case,  introducing  y2_  instead  of  -^ 
alloy),  there  will  be  less  pure  silver  in  the  coin  than  before. 
Like  the  United  States,  Switzerland  was  forced — by  the  fall  in 
the  value  of  gold,  or  the  corresponding  rise  in  the  value  of  sil- 
ver relatively  to  gold — to  reduce  the  amount  of  silver  in  her 
small  coins  in  order  to  keep  them  in  circulation.  The  fall 
in  the  value  of  gold  aifected  countries  differently  according 
as  they  had,  or  had  not,  a  unit  of  low  value  in  their  coinage. 
Where  countries,  like  France,  had  the  franc  as  a  unit,  it  is 
easy  to  see  that  a  fall  in  the  ratio  of  silver  to  gold  should 
have  driven  out  silver,  and  so  removed  from  circulation  in 
these  states  the  silver  currency  in  which  a  unit  of  low  value 
was  necessarily  established.  Such  changes  were  very  serious 
to  the  convenience  of  the  people  in  ordinary  payments.     In 


FRANCE  AND  THE  LATIN  UNION.  I47 

order  to  keep  such  a  unit  in  sucli  a  metal,  thej  would  be 
obliged  to  alter  the  weight  of  their  small  coins,  and  so  to 
change  the  character  of  their  common  unit  of  account.  To 
meet  this  difficulty,  Switzerland,  when  she  found  that  her 
silver  coins  were  fast  being  exported,  made  the  five-franc 
piece  (instead  of  the  franc)  her  monetary  unit,^  which  was 
maintained  at  its  former  weight  and  fineness  (900) ;  but  she 
lowered  the  value  of  her  silver  pieces  of  two  francs,  of  one 
franc,  and  of  fifty  centimes,  to  the  position  of  subsidiary 
coins,  at  800  thousandths  fine. 

Meanwhile  France  ^  and  Italy  had  a  higher  standard  for 
their  coins  than  Switzerland,  and  as  the  neighboring  states, 
which  had  the  franc  system  of  coinage  in  common,  found  each 
other's  coins  in  circulation  within  their  own  limits,  it  was  clear 
that  the  cheaper  Swiss  coins,  according  to  Gresham's  law, 
must  drive  out  the  dearer  French  and  Italian  coins,  which 
contained  more  pure  silver,  but  which  passed  current  at  the 
same  nominal  value.  The  Swiss  coins  of  800  thousandths  fine 
began  to  pass  the  French  frontier  and  to  displace  the  French 
coins  of  a  similar  denomination  ;  and  the  French  coins  were 
exported,  melted,  and  recoined  in  Switzerland  at  a  profit. 
This,  of  course,  brought  forth  a  decree  in  France  (April  14, 
1864)  which  prohibited  the  receipt  of  these  Swiss  coins  at 
the  public  offices  of  France,  tlie  customs-ofiices,  etc.,  and 
they  were  consequently  refused  in  common  trade  among  in- 
dividuals. 

Belgium  also,  as  well  as  Switzerland,  began  to  think  it 
necessary  to  deal  with  the  questions  affecting  her  silver 
small  coins,  which  were  leaving  that  country  for  the  same 
reason  that  they  were  leaving  Switzerland.     Belgium  then 

1  After  1850  "the  five-franc  silver  began  first  to  disappear;  and  soon  the 
fractional  coins  were  displaced  in  their  turn ;  so  that  the  necessary  quantity  of 
subsidiary  coin  was  thus  diminished  to  the  great  injury  of  small  transactions." 
— "  Message  of  the  Federal  Council  of  Switzerland,"  February  2,  1866. 

^  By  the  law  of  May  25,  1864,  the  coinage  of  fifty  and  twenty  centimes  at 
a  fineness  of  ^o^^u  was  authorized  to  the  amount  of  thirty  millions  of  francs ; 
which  was  only  about  one  franc  per  capita  of  subsidiary  coinage.  See  "  Report 
of  1878,"  pp.  782,  783. 


148  THE  LATE  FALL   IN  THE  VALUE   OF  SILVER. 

undertook  to  make  overtures  to  France,^  in  order  that  some 
concerted  action  might  be  undertaken  by  the  four  countries 
using  the  franc  system — Italy,  Belgium,  France,  and  Switzer- 
land— to  remedy  the  evil  to  which  all  were  exposed  by  the 
disappearance  of  their  silver  coin  needed  in  every-day  trans- 
actions. The  discoveries  of  gold  had  forced  a  reconsidera- 
tion of  their  coinage  systems.  In  consequence  of  these 
overtures,  a  conference  of  delegates  representing  the  Latin 
states  just  mentioned  assembled  in  Paris,  l^ovember  20, 
1865,  and,  passing  from  the  immediate  question  of  the  sub- 
sidiary coins,  they  advanced  to  the  discussion  of  the  general 
metallic  circulation  of  the  four  countries.  Belgium,  Switzer- 
land, and  Italy  strongly  urged  the  adoption  of  a  single  gold 
standard,  retaining  silver  in  a  subsidiary  office  for  coins  of 
denominations  below  five  francs.  This  was  defeated  by  the 
action  of  the  French  delegates,  under  influences  said^  to 
come  from  the  Bank  of  France  and  the  Rothschilds.  But 
the  Conference,  fully  realizing  the  effects  of  the  fall  of  gold 
in  driving  out  their  silver  coins,  agreed  to  establish  a  uni- 
form coinage  in  the  four  countries,  on  the  essential  princi- 
ples adopted  by  the  United  States  in  1853.  They  lowered 
the  silver  pieces  of  two  francs,  one  franc,  fifty  centimes,  and 
twenty  centimes  from  a  standard  of  900  thousandths  fine 
to  a  uniform  fineness  of  835  thousandths,  reducing  these 
coins  to  the  position  of  a  subsidiary  currency.  They  re- 
tained for  the  countries  of  the  Latin  Union,  however,  the 
system  of  bimetallism.  Gold  pieces  of  one  hundred,  fifty, 
twenty,  ten,  and  five  francs  were  to  be  coined,  together  with 
five-franc  pieces  of  silver,  and  all  at  a  standard  of  900  thou- 
sandths fine.  Free  coinage,  at  a  ratio  of  15^  :  1,  was  thereby 
granted  to  any  holder  of  either  gold  or  silver  bullion  who 
wanted  silver  coins  of  five  francs,  or  gold  coins  from  five 
francs  and  upward.  Each  coin,  although  stamped  by  either 
of  the  four  countries  with  the  distinctive  devices  of  the  issu- 

>  See  "  Report  of   1878,"  pp.  781-789;  and  also  "  H.  C.  Report  of  1876," 
Appendix,  pp.  104-108.     The  latter  reference  gives  valuable  information. 
»  Dr.  Soetbeer,  "  "Wahrungsfrage,"  p.  29. 


FRANCE  AND  THE  LATIN  UNION.  149 

ing  country  upon  it,  was  to  be  of  uniform  weight,  fineness, 
diameter,  and  tolerance,  as  may  be  learned  from  the  treaty 
signed  December  23,  1865,  which  is  elsewhere  given.^  The 
subsidiary  silver  coins  (below  five  francs)  were  made  a  legal 
tender  between  individuals  of  the  state  which  coined  them 
to  the  amount  of  fifty  francs ;  and  the  issuing  state  agreed  to 
receive  them  from  their  own  citizens  in  any  amount.  The 
quantity  of  coin  outstanding  was  to  be  limited  to  a  quota  of 
six  francs  ^^r  capita,  as  follows  : 

France 239,000,000  fr. 

Belgium 32,000,000  " 

Italy 141,000,000  " 

Switzerland 17,000,000  " 

As  regards  five-franc  silver  pieces,  however,  there  was  un- 
limited free  coinage  to  any  individual  in  the  Latin  Union  at 
the  old  ratio  of  15^  :  1. 

The  treaty  was  ratified,  and  went  into  effect^  August  1, 
1866,  to  continue  until  January  1,  1880,  or  about  fifteen 
years,  as  decreed  by  Article  14 :  "  The  present  convention 
shall  remain  in  force  until  January  1,  1880.  If  not  dis- 
solved a  year  before  the  expiration  of  this  term,  it  shall  re- 
main in  full  force  for  a  new  period  of  fifteen  years,  and  so 
on,  fifteen  years  at  a  time,  if  not  dissolved." 

The  Latin  Union,  while  due  primarily  to  the  disturbances 
caused  by  the  new  gold,  was  aided  in  its  formation  by  the 
growing  disposition  in  enlightened  minds  to  demand  a  uni- 
form international  coinage ;  by  the  natural  wish  of  countries 
having  the  same  monetary  unit  to  prevent  as  much  as  pos- 
sible all  friction  in  trade  across  their  frontiers  ;  and  largely, 
no  doubt,  by  political  considerations  which  led  the  French 
Empire  to  strengthen  its  dominant  position  over  its  smaller 
neighbors.^ 

'  See  Appendix  III,  D,  for  the  text  in  full. 

9  April  10-22,  1867,  Greece  entered  the  Union  ;  April  14,  1867,  Roumania  ; 
June  18,  1866,  the  States  of  the  Church. 

3  This  last  was  the  opinion  of  Mr.  Bagehot.  See  "  H.  C.  Report  of  1876,"  Q. 
1,426. 


150     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

§  2.  The  ratio  of  15|- :  1  retained  by  the  Latin  Union  had 
been  adopted  by  France  in  1803^  (An  XI),  at  the  beginning 
of  her  bimetallic  legislation.  "We  saw,  in  the  course  of  our 
story ,^  that  the  United  States  had  established  a  double  stand- 
ard in  1792,  but  that,  owing  to  the  fall  in  the  value  of  sil- 
ver, it  soon  resulted  in  a  single  standard  of  silver.  It  will  be 
recalled  that,  in  that  discussion,  it  had  been  claimed  that  silver 
had  not  fallen,  but  that  gold  had  risen,  in  value.  Moreover, 
it  had  been  asserted  that  the  reason  why  gold  left  the  United 
States  in  that  period  was  the  existence  of  a  ratio  in  France 
of  15^  :  1,  different  from  ours;  which,  by  offering  half  an 
ounce  more  of  silver  in  exchange  for  gold  than  was  se- 
cured by  the  ratio  of  15  :  1  in  the  United  States,  led  to  the 
exportation  of  silver  to  France.^  Unfortunately  for  this 
theory,  the  facts  are  against  it,  for  M.  Chevalier  has  told  ^  us 
that  soon  after  the  year  1803  there  occurred  the  first  of  three 
great  movements  which  have  disarranged  the  French  coinage 
from  that  time  to  this.  He  assures  us  that  soon  after  the 
law  of  1803  was  passed  the  relative  values  of  gold  and  silver 
in  Prance  changed  so  considerably,  in  comparison  with  what 
they  had  been  before,  that  the  market  rate  no  longer  coin- 
cided with  the  Mint  ratio  of  15|^ :  1 ;  that  the  market  ratio 
in  France  rose  beyond  15^  :  1 ;  so  that  an  ounce  of  gold 
bought  more  silver  in  the  bullion  market  than  it  did  at  the 

'  "  When  the  value  of  gold  relatively  to  silver  increased,  the  state  decreased 
the  weight  of  gold  forming  the  monetary  unit ;  when  it  was  the  value  of  silver 
which  increased,  the  state  decreased  the  weight  of  silver.  Thus,  in  the  course 
of  centuries,  the  weight  of  the  coin  was  constantly  diminished  and  reduced  ;  it  ia 
true,  the  name  remained  the  same  ;  the  monetary  unit  was  always  called  the 
livre  until  the  time  when  its  name  was  changed  by  law  in  the  year  XI  to  that 
of  franc ;  but  the  livre  was  no  longer  a  pound ;  it  decreased  and  decreased  until 
it  was  reduced  to  a  very  small  part  of  the  original  pound.  This  was  proiStable 
to  the  government  who  coined  the  money ;  it  was  profitable  to  debtors  who 
were  freed  from  their  debts  by  a  weight  of  gold  or  silver  less  than  that  which 
had  been  agreed  upon ;  but  all  these  profits  were  made  at  the  expense  of  the 
whole  people." — M.  Burkhardt-BischolF,  "French  Report  Mon.  Conf.  of  1881," 
i,  p.  132.     For  the  text  of  the  law  of  18C3,  see  Appendix  III. 

2  See  Chap,  ii,  §  5. 

2  H.  C.  Burchard,  article  "  Coinage,"  in  Lalor'a  "  Cyclopaedia." 

*  "Journal  des  Economistes,"  June,  1876,  p.  443. 


FRANCE  AND   THE  LATIN  UNION.  151 

Mint.  As  a  consequence,  gold  was  bought  and  sold  only 
as  merchandise.  Now  this  was  exactly  the  process  which 
we  found  going  on  in  the  United  States  at  the  same  time ; 
and,  to  my  mind,  there  can  not  be  a  moment's  doubt  that 
the  events  in  the  two  countries  were  due  to  the  same  cause 
— the  enormous  production  of  Mexican  silver  after  1780. 
And,  moreover,  if  gold  was  being  withdrawn  from  the 
French  circulation,  it  is  diflScult  to  understand  how  it  could 
have  gone  from  the  United  States  to  France,  attracted  by 
the  French  Mint  ratio  of  lo^:  1,  when  gold  was  not  being 
coined  there.  In  fact,  the  simultaneous  withdrawal  of  gold 
in  two  widely  separated  countries,  so  soon  as  the  market  ratio 
diverged  from  the  Mint  ratio,  starts  the  presumption  that  a 
cause  was  at  work  of  greater  fundamental  importance  than  the 
difference  between  the  legal  ratios  of  two  countries,  which 
acted  the  one  upon  the  other.  France,  however,  did  not  mod- 
ify her  ratio,  as  did  the  United  States  in  1834,  but  remained 
content  with  a  circulation  which,  as  M.  Chevalier  states,  was 
composed  almost  exclusively  of  silver.  This  state  of  affairs 
continued  with  some  interruptions  until  1848,  during  which 
the  market  ratio  sometimes  approached  more  nearly  to  15|^ :  1, 
because  the  production  of  gold  from  the  Russian  mines  had 
largely  increased  by  the  year  1841.  To  1848,  consequently, 
and  during  the  greater  part  of  the  period  since  1803,  France 
had  virtually  but  a  single  standard  of  silver ;  although  by  law 
she  had  a  double  standard  of  both  gold  and  silver. 

The  second  experience  of  France  with  her  coinage  began 
with  the  discoveries  of  gold  in  California  and  Australia.  In 
comparing  the  beginning  of  the  century  with  1864  it  ap- 
pears that  the  production  of  gold  had  increased  fourteen  or 
fifteen  times,  while  the  production  of  silver  had  increased 
only  one  third.  The  consequent  effects  of  this  enormous 
production  of  gold  on  the  French  coinage  after  1850  I  have 
already  described.^  The  circulation  of  France  underwent  a 
complete  change,'^  in  spite  of  the  frequent  representations 

'  Chap,  viii,  §  6. 

2  Chevalier  says  that  under  Louis  Philippe  there  was  coined  of  gold  216,000,- 


152     THE  LATE  FALL  IX  THE  VALUE  OF  SILVER. 

that  the  ratio  established  in  1803  had  kept  the  relative  value 
of  gold  and  silver  within  such  limits  as  to  preserve  the  con- 
current circulation  of  the  two  metals.  In  such  questions  more 
satisfaction  is  to  be  derived  from  facts  than  from  vague  decla- 
mations. After  1850,  not  only  five-franc  silver  pieces,  but  the 
small  coins  employed  in  the  retail  transactions  of  every-day 
use,  began  to  disappear.  The  absence  of  small  silver  led,  as 
we  have  seen  in  the  last  section,  to  the  events  which  brought 
about  the  convention  of  the  Latin  Union  in  1865.  But  the 
appearance  of  gold  was  hailed  by  the  public  of  France  with 
that  evident  satisfaction  which,  as  has  been  referred  to  many 
times  before,  always  results  from  the  universal  preference  of 
mankind  in  commercial  and  civilized  countries  for  gold  over 
silver.  In  the  years  preceding  1848  international  commerce 
with  France  had  been  but  little  developed,^  and  there  had  been 
little  need  for  the  transportation  abroad  of  very  large  sums 
of  specie.  After  1850,  however,  commercial  conditions  be- 
gan to  change,  and  the  use  of  gold  in  large  payments  was 
naturally  a  great  convenience.  The  state  of  mind  in  France 
is  thus  described  by  M.  Chevalier,  from  whom  I  again  quote  :  ^ 

"  The  public  applauded  this  introduction  of  gold  into  the 
place  of  silver  for  the  same  reasons  which  had  earlier  attracted 
the  English  people — viz.,  gold  pieces  are  more  easily  handled, 
a  certain  amount  can  be  carried  more  conveniently,  and  count- 
ing takes  less  time." 

Such  was  the  condition  of  monetary  affairs  in  France  at 
the  time  of  the  creation  of  the  Latin  Union  in  1865.  Since 
1803  she  had  first  lost  her  gold  and  taken  an  alternative  stand- 
ard of  silver  instead ;  and  then,  reversing  the  process,  because 
she  still  maintained  the  legal  ratio  of  15^ :  1,  slie  lost  her  sil- 
ver and  took  an  alternative  standard  of  gold.  This  last  oper- 
ation undoubtedly  acted  as  a  "  parachute  "  to  lessen  the  fall 
which  otherwise  gold  must  have  suffered. 

000  francs,  of  silver  1,757,000,000  francs;  but  under  the  Second  Empire 
6,152,000,000  francs  of  gold,  and  only  625,000,000  of  silver. 

*  See  "  Histoire  du  systfeme  monetaire  Fran9ais,"  by  L.  Pauliat,  "  Joum.  des 
iificonomistes,"  June,  1881,  p.  428. 

^  "Journal  des  ficonomistes,"  June,  1876,  p.  444. 


FRANCE  AND  THE  LATIN  UNION.  I53 

The  whole  of  this  history  is  a  striking  commentary  on  the 
fact  that  an  increase  in  the  production  of  silver  does  not  lead 
to  an  additional  employment  of  it  by  the  civilized  world  as 
a  medium  of  exchange ;  but  that  an  increase  in  the  jjroduc- 
tion  of  gold,  so  long  as  human  nature  remains  what  it  now 
is,  does  lead  inevitably  to  a  more  extended  use  of  it  as  a  me- 
dium of  exchange  in  modern  commercial  countries ;  and  just 
to  the  extent  of  its  increase  does  gold  push  out  of  use  the 
silver  it  displaces,  as  an  inferior  instrument  of  exchange,  thus 
contracting  the  monetary  field  in  which  silver  can  be  used, 
and  lessening  the  demand  for  it.  An  increased  production  of 
gold  has  caused  a  depreciation  in  silver  which  forms  a  part 
of  the  movement  by  which  mankind  is  furnishing  itself  with 
better  instead  of  inferior  tools  in  all  the  departments  of  com- 
merce and  industry.  When  new  and  lighter  plows  come 
into  competition  with  the  heavy  and  cumbrous  machines  of 
the  last  century,  the  latter  will  go  out  of  use  and  decline  in 
value.  So  it  will  be  with  the  heavier  and  more  cumbrous 
of  the  precious  metals. 

§  3.  The  International  Monetary  Conference  of  1867, 
which  assembled  in  Paris  with  the  original  motive  of  bring- 
ing about  a  uniform  system  of  coins  throughout  the  world, 
was  led  to  ask,  Of  what  metal  shall  the  uniform  coins  be 
struck?  The  almost  unanimous  verdict  of  this  conference 
was  that  the  single  standard  of  gold  should  be  recommended. 
Such  was  the  state  of  public  opinion  in  the  chief  commercial 
nations  in  1867.  Several  elaborate  monetary  reports  were 
made  by  French  commissions  created  for  the  purpose  be- 
tween 1867  and  1870,  and  it  seemed  as  if  the  adoption  of  a 
gold  standard  by  France  in  1870  was  a  settled  thing.  Then 
the  Franco-Prussian  war  broke  out,  and  the  close  of  the  war 
was  immediately  followed  by  the  German  monetary  reform. 
There  can  scarcely  be  any  doubt  that,  had  not  Germany  acted 
when  she  did,  France  and  wide-awake  Belgium  would  have 
demonetized  silver,  and  done  exactly  what  Germany  antici- 
pated them  in  doing. 

Cut  off  from  this  policy,  France  and  the  Latin  Union, 


154     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

however,  were  soon  forced  to  consider  the  effects  of  another 
change  (the  third  since  1803)  in  their  monetary  system  aris- 
ing from  unforeseen  movements  in  the  relative  values  of 
gold  and  silver.  The  convention  of  1865  had  been  entered 
into  because  gold  had  become  cheaper  than  silver.  But,  a 
very  few  years  after  the  contracting  powers  had  ratified  this 
convention  of  1865,  a  change  in  the  market  value  of  sil- 
ver removed  all  ground  for  its  existence.  Silver  began  to 
falP  relatively  to  gold  as  early  as  1872,  and  soon  reached  a 
value  more  nearly  in  accordance  with  the  ratio  of  15*5  :  1. 
Had  the  fall  ended  there,  all  further  difficulty  would  have 
been  avoided.  But  the  progress  of  events  was  against  this 
supposition.  The  fall  of  silver  (which  did  not  reach  its  cul- 
mination until  1876)  continued,  and  the  countries  of  the  Latin 
Union  were  threatened  with  conditions  the  very  opjjosite  of 
those  which  existed  in  1865 ;  then  they  were  studying  how 
to  keep  gold  from  driving  out  even  their  subsidiary  silver 
coins ;  by  1873,  on  the  contrary,  they  were  occupied  with  the 
question  how  the  enormous  influx  of  silver  could  be  pre- 
vented :  "  When,  then,  toward  the  end  of  1873,  Prussia  hav- 
ing announced  its  intention  of  demonetizing  silver,  which  at 
that  time  had  already  undergone  a  sensible  depreciation  in  the 
market,  some  of  the  states  bound  by  the  convention  thought 
it  necessary  to  protect  themselves  against  an  excessive  and 
sudden  influx  of  this  coin,  and  called  a  new  meeting  of  the 
Conference.  Any  restrictive  measure,  such  as  the  limitation 
or  suspension  of  coinage,  if  undertaken  separately,  would  be 
ineffective  so  long  as  any  of  the  allied  states  continued  to 
issue  coins  which  would  be  introduced  into  other  states  of 
the  Union."  ^ 

The  downward  tendency  of  silver  in  1873  led  the  Latin 
Union  to  fear  that  the  demonetized  silver  of  Germany  would 
flood  their  own  mints  if  they  continued  the  free  coinage  of 
five-franc  silver  pieces  at  a  legal  ratio  of  15^  :  1.   Fifteen  and  a 

'  See  tables  in  Appendix  II  and  Chart  XIII. 

"  Annex  to  the  Monetary  Convention  of  January  31,  18Y4,  presented  to  the 
French  Government. — "Journal  des  ficonomistes,"  July,  1874,  p.  108. 


FRANCE  AND  THE  LATIN  UNION.  155 

half  ounces  of  silver  were  still  counted  as  equal  to  one  ounce 
of  gold  at  the  Mint ;  but  since  in  the  market  more  than  that 
number  of  ounces  of  silver  were  needed  to  buy  one  ounce  of 
gold,  naturally  silver  rushed  to  the  mints  of  the  Latin  Union. 
In  1871-1872,  before  the  fall  in  the  value  of  silver  was  notice- 
able, there  had  been  presented  at  the  French  Mint  for  coin- 
age into  iive-franc  pieces  only  5,000,000  francs  of  silver  bull- 
ion ;  in  Belgium,  only  33,000,000 ;  but  in  1873  alone,  be- 
cause it  was  profitable  to  money-brokers,  there  was  suddenly 
presented  at  the  French  Mint  154,000,000,  and  at  the  Belgian 
Mint  111,000,000  francs.  As  a  consequence  of  this  move- 
ment, December  18,  1873,  an  act  was  passed  by  Belgium 
which  gave  the  government  authority  to  suspend  the  coinage 
of  silver  five-franc  pieces. 

This  condition  of  things  led  to  the  meeting  of  delegates 
from  the  countries  of  the  Latin  Union  at  Paris,  January  30, 
1874,  who  there  agreed  to  a  treaty  supplementary  ^  to  that 
originally  formed  in  1865,  and  determined  on  withdrawing 
from  individuals  the  full  power  of  free  coinage  by  limiting  to 
a  moderate  sum  the  amount  of  silver  five-franc  pieces  ^  which 
should  be  coined  by  each  state  of  the  Union  during  the  year 
1874.  The  date  of  this  suspension  of  coinage  by  the  Latin 
Union  is  regarded  by  all  authorities  as  of  great  import  in  re- 
gard to  the  value  of  silver.  At  the  time  perhaps  its  import- 
ance did  not  seem  so  evident.^  The  French  authorities  be- 
lieved that  the  action  of  Germany  was  only  a  temporary  inci- 

'  For  the  text  of  this  document  see  "  Journ.  des  Econ.,"  July,  18*74,  pp. 
112,  113. 

2  France 60,000,000  f r. 

Belgium 12,000,000  " 

Italy 40,000,000  " 

Sn'itzerland 8,000,000  " 

Italy  was  also  allotted  an  extra  20,000,000  fr.,  and  certain  deposits  at  the  Mint, 
for  which  coin  warrants  had  been  issued,  were  also  excepted. 

'  Wolowski  held  that  the  slight  fall  in  silver  at  this  time  was  a  "  passing 
circumstance  " ;  and  that  when  the  various  countries  then  laboring  under  heavy 
issues  of  paper  money  began  to  resume  payments  in  specie,  the  danger  would 
be  that  there  would  not  be  enough,  rather  than  that  there  would  be  too 
much,  of  silver. — "Journ.  des  Econ.,"  December,  1873,  p.  506. 


156     THE  LATE  FALL  IX  THE  VALUE  OF  SILVER. 

dent  affecting  the  value  of  silver ;  they  stated/  therefore,  that 
"  to  an  irregular  and  accidental  event  they  [the  Latin  Union] 
opposed  a  temporary  measure,  as  exceptional  as  the  decision 
which  called  it  forth."  They  did  not  then  see  that  the  ac- 
tion of  Germany  was  important,  not  for  itself,  but  because 
of  its  place  in  a  series  of  events  due  to  the  progress  of  mone- 
tary ideas.  We  must,  therefore,  regard  the  suspension  of 
unlimited  coinage  of  silver  by  the  Latin  Union  as  a  very 
important  step,  because  it  forms  another  event  in  the  series 
to  which  the  demonetization  of  silver  by  Germany  be- 
longs. 

§  4.  The  suspension  of  the  free  coinage  of  five-franc  silver 
pieces  by  the  Latin  Union  was  a  consequence  of  the  falling 
value  of  silver.  So  long  as  the  ratio  of  silver  to  gold  re- 
mained above  1 :  15|^,  these  four  countries  could  not  continue 
to  receive  silver  at  their  mints  unless  they  were  willing  to  see 
gold  disappear  from  their  reserves  and  from  circulation,  and 
to  see  silver  alone  take  its  place.  About  this  decision  there 
was  no  hesitation  whatever ;  the  Latin  Union  had  no  inten- 
tion of  giving  up  gold,  once  that  it  had  flowed  into  their  ter- 
ritories. The  preference  for  gold  over  silver,  when  there  is  a 
free  choice  between  the  two,  again  received  a  striking  illus- 
tration. And  all  the  subsequent  movements  of  the  Latin 
Union  have  been  prompted  not  so  much  by  the  wish  to  show 
a  preference  for  a  silver  medium  as  by  a  desire  to  protect 
themselves  against  the  loss  arising  from  the  possibility  of  sell- 
ing the  silver  with  which  they  have  already  burdened  them- 
selves. They  would  all,  at  this  moment,  gladly  embrace  an 
opportunity  to  place  themselves  on  a  gold  basis  if  they  could 
do  so  without  serious  loss  in  disposing  of  their  silver. 

After  1874  the  Latin  Union,  owing  to  the  continued  de- 
cline in  the  value  of  silver,  maintained  their  policy  of  restrict- 
ing the  coinage.  In  1875,  pursuant  to  the  agreement  of  a 
year  before,  another  monetary  conference  was  held  in  Paris, 

*  Annex  to  Monetary  Convention  of  January  31,  1874. — "  Joum.  des  Econ.," 
July,  ISH,  p.  111. 


FRANCE  AND  THE  LA.TIN   UNION.  157 

and  limited  quotas  ^  of  silver  were  fixed  for  coinage  by  each 
state.  The  annual  conference  in  18Y6  lessened  the  total 
amount^  to  be  coined  to  120,000,000  francs  for  the  whole 
Union.  About  this  same  time  Holland,  a  country  not  a  mem- 
ber of  the  Latin  Union,  took  a  step  away  from  a  silver  medium 
by  forbidding  ^  any  further  coinage  of  silver  after  July  1, 1875. 
The  various  states  of  the  Latin  Union,  moreover,  did  not  coin 
all  the  silver  assigned  to  them  as  their  quotas.  In  1875  and 
1876  Switzerland  cautiously  did  not  coin  any  of  her  quota. 

In  studying  this  example  of  a  monetary  union  between 
different  states  it  is  to  be  noticed  that  each  state  reserved  to 
itself  the  power  to  suspend  the  coinage  entirely.  The  agree- 
ments of  the  convention  fixed  only  the  maximum  amounts 
beyond  which  the  coinage  of  silver  should  not  go.  As  we 
have  already  seen,  Belgium  had  passed  a  law  in  1873  giving 
the  government  power  to  suspend  the  coinage  of  silver  en- 
tirely.    France  likewise  found  it  expedient,*  on  August  5, 

1876,  to  shut  the  doors  of  her  Mint  to  silver.  It  will  be  seen, 
therefore,  that  one  country  after  another,  so  long  as  the  old 
ratio  of  1 :  15^  was  adhered  to,  was  obhged  to  close  its  mints 
to  the  coinage  of  silver. 

In  1877  the  Union  suspended  entirely  the  coinage  of  five- 
franc  pieces  for  that  year  (except  a  sum  of  10,000,000  francs 

i  For  France 75,000,000  f r. 

"    Italy 50,000,000  " 

"    Belgium 15,000,000" 

"    Switzerland 10,000,000" 

2  For  France 54,000,000  fr. 

"    Italy 36,000,000  " 

"    Belgium 10,800,000  " 

"    Switzerland 7,200,000  " 

"    Greece 3,600,000" 

Cf.  "  Journ.  des  ficon.,"  March,  1876,  p.  443. 

'  Cf.  "Journ.  des  Econ.,"  August,  1875,  p.  172.  This  act  ran  until  January  1, 

1877,  but  was  at  that  date  continued  in  force. 

*  "  La  fabrication  de  pieces  des  5  francs  en  argent  pourra  Stre  limited  ou 
Buspendue  par  decrets,"  was  the  phrase  of  the  act.  A  decree  in  consonance 
with  the  law  was  issued  the  next  day  (August  6th)  after  its  passage.  For  the 
animus  of  the  law,  see  the  statement  of  L6on  Say,  "  H.  C.  Report  of  1876," 
Appendix,  p.  92. 
12 


158     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

for  Italy).  This  position  in  regard  to  silver,  however,  was 
only  preliminary  to  the  decisive  action  of  the  Union  in  a 
treaty  of  November  5,  1878.  In  order  to  prevent  gold  from 
disappearing  and  being  replaced  by  silver,  a  policy  of  succes- 
sive restriction  was  originally  adopted  in  1874 ;  but  in  1878 
the  final  policy  of  complete  suspension  was  accepted.  It 
was  mutually  agreed  by  the  contracting  parties  that  the 
"coinage  of  silver  five-franc  pieces  is  provisionally  sus- 
pended. It  may  be  resumed  when  a  unanimous  agreement 
to  that  effect  shall  be  established  between  all  the  contract- 
ing states."  ^  This  agreement  was  to  hold  until  January  1, 
1886.  The  Union  was  not,  however,  dissolved,  because 
they  continued  their  coinage  of  subsidiary  coinage  (at  835 
thousandths  fine)  on  the  common  terms  of  the  original  con- 
vention of  1865.  The  suspension  of  five-franc  pieces  was  the 
important  point  of  the  treaty  of  1878,  because  it  was  the  only 
silver  piece  which  bore  a  ratio  of  15^  :  1  to  the  gold  coins.^ 

Since  1878,  therefore,  the  chief  bimetallic  countries  of 
Europe  decided  that,  so  long  as  they  chose  to  retain  the  legal 
ratio  of  15|^ :  1  between  gold  and  silver  coins,  it  was  impos- 
sible to  keep  open  the  mints  for  the  presentation  of  silver 
bullion.  This  was  their  "  expectant  attitude  "  toward  silver ; 
they  hoped  that,  if  the  value  of  silver  rose,  the  coinage  of 
silver  might  be  again  resumed.  They  are  evidently  hoping 
against  hope,  for  since  then  Italy  has  resumed  specie  pay- 
ments, in  1883,  while  Switzerland  and  Belgium  are  evi- 
dently anxious  to  place  themselves  on  a  gold  basis ;  and, 
worst  of  all  for  the  continuance  of  a  coinage  convention 
based  on  a  ratio  of  16^  :  1,  silver  has  steadily  fallen  in  value 
since  1878,  and  at  the  present  writing  (September,  1885)  the 
price  has  fallen  to  4r7^d.  per  ounce  in  London,  equivalent  to 
a  ratio  of  more  than  20  : 1.  In  the  face  of  such  facts,  the 
return  to  a  bimetallic  system  at  15^  :  1  by  the  Latin  Union 
is  an  impossible  thing.     I  do  not  think  it  will  ever  occur. 

The  depreciation  of  silver  weighs  heavily  on  France,  be- 

I  "  Report  of  181S,"  p.  735. 

'  The  coinage  of  gold  five-franc  pieces  was  also  suspended  by  this  treaty. 


FRANCE  AND  THE  LATIN  UNION. 


159 


cause  she  has  coined  a  vast  quantity  of  five-franc  pieces  since 
1865,  which  have  entered  into  circulation  or  have  accumu- 
lated in  the  reserves  of  the  Bank  of  France ;  and  whenever 
in  the  course  of  the  international  exchanges  a  payment  of 
specie  is  to  be  made  by  France  to  a  foreign  country,  it  must 
be  made  in  gold  out  of  a  fund  in  the  bank  which  is  not  over 
large.  France  can  not  return  to  the  double  standard,  nor 
can  she  adopt  a  single  gold  standard,  because  the  sale  of  her 
superfluous  silver,  except  at  a  very  great  sacrifice,  is  now  a 
practical  impossibility.  France  is  forced  into  her  present 
"  expectant  attitude  "  because  of  the  quantity  of  silver  she 
has  to  dispose  of.  It  is  her  object,  therefore,  to  continue  the 
Latin  Union  as  long  as  possible,  for  a  dissolution  of  the  league 
would  necessarily  oblige  each  state  to  liquidate  its  own  issues 
of  silver  coinage.  In  the  future  each  state  must  have  its 
own  system,  and  the  coins  of  one  country  would  not  be  re- 
ceived reciprocally  by  the  others,  and,  when  rejected,  they 
would  be  sent  home  to  the  banks  of  the  issuing  country 
under  such  financial  pressure  as  would  make  it  necessary  to 
redeem  them  in  some  form  or  other.  Of  a  total  sum  of 
6,117,000,000  francs  coined  by  the  countries  composing  the 
Union,  3,910,000,000  are  still  on  hand,^  of  which  3,100,000,- 
000  bear  the  stamp  of  the  French  Mint.  In  case  of  a  disso- 
lution of  the  Union,  the  Belgian  and  Italian  pieces  in  France 
would  be  sent  out  for  redemption  in  gold  to  the  issuing 


'  Probably  400  millions  of  Belgian  stamp. 
400  "  Italian        " 

9-5       "  Swiss  " 

3,100  "  French        " 

The  following  statement  is  given  by  Ottomar  Haupt ; 


STATES. 

Gold  stock. 

Current  silver. 

Subsidiary- 
silver. 

Uncovered  bank- 
notes. 

France  

Belgium 

Italy 

Fr. 

4,400  millions. 
360         " 
730         " 
70 

Fr. 

3,400  millions. 
300 
170 
40 

Fr. 

200  millions. 

33 
170         " 

18         " 

Fr. 
990  millions. 
244 
709         " 

Switzerland .... 

55         « 

Dr.  A.  Soetbeer.  "  VVahrungsfrage,"  p.  32. 


160  THE  LATE  FxVLL  IX  THE  VALUE   OF   SILVER. 

states,  and  to  that  extent  France  would  be  temporarily  better 
off.  For  this  reason  some  persons  in  France  are  urging  the 
dissolution  of  the  Latin  Union.  The  silver  pieces  of  other 
states  are  not  a  legal  tender  in  France,  although  the  Bank  of 
France  has  hitherto  received  such  silver  on  sufferance.  The 
existence  of  a  large  amount  of  silver  in  the  reserves  of  the 
bank  requires  that  its  wishes  should  be  consulted  by  the 
authorities  of  France  in  a  settlement  of  this  question.  More 
silver  is  in  circulation  in  the  Latin  Union  than  can  pass  cur- 
rent at  the  legal  rate,  and  it  flows  to  the  large  banking-houses 
and  encumbers  the  vaults  of  the  bank. 

The  treaty  of  1878  expires  January  1, 1886,  and  even  now 
the  delegates  of  the  Union  are  assembled  in  Paris  discussing 
the  continuance  of  the  present  agreements.  Belgium,  which 
has  been  very  energetic  m  dealing  with  economic  questions,  is 
now  anxious  to  demonetize  silver  and  adopt  the  gold  standard. 
The  same  is  true  of  Switzerland,  and  France  stands  almost 
alone.  The  negotiations  looking  to  a  renewal  of  the  Union 
are  not  yet  fully  known.  France  demands  "  that  each  of  the 
powers  forming  the  Union  shall  bind  itself  to  redeem  at  their 
par  value  all  its  silver  five- franc  pieces  that  may  be  circulat- 
ing abroad  if  and  when  the  Union  comes  to  an  end,"^  Bel- 
gium objects,  because  coins  have  been  issued  from  her  Mint 
not  only  for  herself,  but  on  the  account  of  Switzerland,  of 
Italy,  and  even  of  France.  Belgium,  however,  will  be  forced 
in  some  way  to  redeem  her  coinage,  and  it  is  highly  probable 
that  the  Union  will  be  continued.  At  the  third  sitting  of 
the  Conference,  which  began  July  20, 1885,  Belgium  declined 
to  accept  the  demands  of  France,  and  declared  that,  if  this 
was  a  sijie  qua  non  for  the  renewal  of  the  treaty,  she  pre- 
ferred to  withdraw ;  but,  whatever  the  result  of  this  last  Con- 
ference, it  is  quite  clear  that  they  have  no  thought  whatever 
of  adding  to  their  burden  of  silver,  from  which  it  is  now 
their  problem  to  escape.  This  being  true,  there  is  not  a  mint 
in  Europe  now  open  to  the  free  coinage  of  silver. 

'  Cf.  "  London  Economist,"  August  22,  1885.     It  is  stated  that  $125,000,000 
of  Belgian  silver  coins  are  in  circulation  in  France. 


CHART  XIII. 


CHAPTER  XII. 

THE    CAUSE    OF   THE   FALL   Df   THE   VALUE   OF    SILVER. 

§  1.  After  having  thus  presented  in  the  foregoing  chap- 
ters of  Part  II  the  monetary  events  which  have  affected  the 
relative  values  of  the  two  precious  metals  since  1850,  it  is 
now  intended  to  make  a  brief  statement  of  the  conclusions 
to  be  drawn  from  this  account  as  to  the  value  of  silver,  and 
to  give  in  brief  form  what  seems  to  me  to  have  been  the 
essential  cause  of  the  depreciation  of  silver.  Before  this  can 
be  done,  however,  it  will  be  necessary  to  show  whether  a  fall 
of  silver  actually  did  take  place,  and  to  what  extent  a  depre- 
ciation has  been  proved. 

At  the  beginning  of  the  present  century  the  price  of 
silver  feU  until  about  1825  ;  then  the  course  of  its  value  re- 
mained fairly  unchanged  until  about  1850,  when  the  new 
gold  was  discovered ;  and  until  1872  no  great  fluctuations 
had  occurred.  The  movement  of  its  value  in  later  years 
may  be  seen  by  the  line  of  Chart  XIII,  which  shows  the 
yearly  changes  since  1687.  A  comparison  with  Chart  TV 
will  show  that  since  the  discovery  of  America  the  value  of 
silver  relatively  to  gold  has  been  moving  steadily  downward, 
while,  as  we  know,  gold  itself  has  also  fallen  in  value; 
but  in  the  present  century,  after  the  effect  of  the  Mexican 
production  was  finally  realized  in  a  generally  lower  level, 
there  had  been  nothing  of  great  importance  to  disturb  its 
position  until  the  later  period  with  which  we  are  now  deal- 
ing. A  glance  at  Chart  XIII  will  make  it  clear  how  marked 
and  sudden  a  change  took  place  after  1872,  and  in  the  years 


162  THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

immediately  following,  as  compared  with  the  general  move- 
ment of  silver  since  1687.  This  sharp  and  distinct  fall, 
especially  after  18Y4,  and  continuing  since  then  to  1885,  has 
no  parallel  in  the  whole  history  of  the  precious  metals. 
"Within  ten  years  the  ratio  of  silver  to  gold  has  been  changed 
from  an  annual  average  relation  of  about  15^ :  1  to  nearly 
19:1. 

As  is  well  known,  London  is  the  chief  silver  market 
of  the  world,  and  prices  of  silver^  are  given  in  pence  per 
ounce  for  English  standard  silver,  f^  fine.  That  is,  the 
price  of  silver  is  estimated  in  the  English  gold  currency. 
From  1853  to  1866  the  price  did  not  change  much  from 
about  61d.  per  ounce,  which  is  equivalent^  to  a  ratio  of 
15*46  :  1 ;  from  1867  to  1872  the  price  was  a  little  more 
than  60d.  per  ounce.  By  examining  the  table  ^  of  monthly 
prices  of  silver,  it  will  be  seen  that  the  fall  first  began  in 
I^ovember,  1872,  when  the  price  was  about  59^d.  Then 
from  November,  1872,  until  January,  1876,  there  was  a 
steady  decline,  as  seen  from  the  monthly  prices,  to  about  55d. 
And  in  the  year  1876  the  price  fell  still  more  rapidly,  from 
about  55d.  in  January  to  the  lowest  recorded  price  of  46|c?. 
in  July  (equivalent  to  a  ratio  of  1 :  20*17).  Since  then  there 
have  been  reactions  toward  better  prices,  but,  on  the  whole, 
the  price  has  steadily  declined  until,  in  September,  1885,  the 
price  is  almost,  if  not  fully,  as  low  as  it  ever  was  in  1876. 

It  will  appear  from  this  statement,  therefore,  that  silver 
has  unquestionably  fallen  very  seriously  since  1872  in  its  rela- 
tion to  gold.  But  the  question  may  very  justly  be  asked. 
Has  this  fall  been  accompanied  by  a  general  increase  of  pur- 
chasing power  in  gold  as  regards  other  commodities  ?  If  so, 
the  fall  of  silver  relatively  to  gold,  when  other  articles  have 

'  See  Appendix  11,  D,  for  London  prices  since  1833.  Monthly  quotations  in 
each  year  since  1833  to  1880,  by  Pixley  and  Abell,  can  be  found  in  the  "French 
Report  of  the  Mon.  Conf.  of  1881,"  i,  p.  197.  The  average  monthly  ratio  from 
1845  to  1880  is  given  in  Appendix  II,  F. 

'  For  the  computation  of  the  ratio  from  the  price,  see  Appendix  II,  G. 

'  Appendix  II,  E. 


THE   CAUSE  OF  THE  FALL  IN   THE    VALUE  OF  SILVER.  163 

also  fallen  relatively  to  gold,  will  have  left  silver  in  the  same 
relative  position  to  other  goods  as  before  ;  and  so  it  can  not 
be  said  that  silver  has  fallen,  but  that  gold  has  risen,  in  value. 
This  question,  while  eminently  fair,  is  not  capable  of  being 
answered  in  a  brief  way ;  and  to  answer  it  fully  would  lead 
me  away  from  the  object  of  this  inquiry.  It  has  been  urged 
by  Mr.  Goschen  and  Mr.  Giffen  that  there  has  been  an  appre- 
ciation of  gold  by  1879  as  compared  with  1873 ;  but  I  shall 
not  now  consider  their  position,  because  the  years  to  be  here 
compared,  in  order  to  keep  parallel  with  the  movements  of 
silver,  are,  on  the  one  hand,  1871,  and  on  the  other,  1876  or 
1877.  And  I  waive  for  the  present — what  is  of  the  utmost 
importance  in  discussing  the  appreciation  of  gold — the  fact 
that  there  was  a  great  collapse  of  credit  in  1873  and  a  fall  of 
prices  due  to  other  causes  than  the  abundance  or  scarcity  of 
specie  in  the  world.  In  order  to  bring  the  fall  of  silver  into 
comparison  with  the  movement  of  prices  between  1871  and 
1877  I  subjoin  the  following  table  of  prices,  taken  ^  from  the 
London  "  Economist's  "  figures  for  the  first  of  January  each 
year,  being  the  prices  of  22  articles,  each  on  a  scale  of  100, 
making  a  total  scale  of  2,200,  which  represents  the  average 
prices  of  these  articles  in  1845-1850 : 


TEAR. 

Index  numbers. 

Price  of  silver 
In  pence. 

Corresponding 
ratios. 

1845-50    

2200 

2996 

2612 

3575 

3564 

3024 

26821 

2666  i 

2689  f 

2590  J 

2835 

2947 

2891 

2778) 

2711  y 

2723) 

61| 

61 1\ 

61tV 

611 

60i\ 

60i 

60/ff 

6(>tV 

60-1% 

60| 

59\ 

58A 

56| 

53,^ 

54f 

1857,  July  1 

1858,  Jan.  1 

1865 

15-27 
15-38 
15-44 

1866 

15-43 

1867 

15-57 

1868 

15-59 

1869 

15-60 

1870 

15-57 

1871 

15-57 

1872 

15-65 

1873 

15-92 

1874 

16-17 

1875 

16-62 

1876 

1877 

17-77 
17-22 

'  See  the  movement  of  the  line  in  Chart  III,  which  is  based  on  these  figures. 


IQ4:  THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

From  these  figures  it  will  be  seen  that  prices  were  as 
high  in  1876  and  1877  as  they  were  in  1875,  and  even  higher 
than  from  1868  to  1871  (inclusive).  That  is,  so  far  as  prices 
tell  the  story,  it  can  not  be  said  with  any  show  of  truth  that 
gold  had  appreciated  (that  is,  increased  in  its  purchasing 
power,  because  prices  had  fallen).  If,  then,  gold  continued 
to  buy  about  the  same  quantities  of  other  goods  from  1871 
to  1877,  and  if  in  that  time  silver  fell  relatively  to  gold  from 
about  GOd.  to  46|6?.  per  ounce,  it  is  quite  correct  to  say  that 
silver  fell  not  merely  with  reference  to  gold,  but  with  reference 
to  all  other  commodities,  including  gold.  As  compared  with 
60|6?.,  the  average  price  in  1872,  the  fall  to  46|(^.  in  July, 
1876,  indicates  a  depreciation  in  the  value  of  silver  of  more 
than  22  per  cent ;  that  is,  silver  lost  general  purchasing 
power  over  other  commodities  by  July,  1876,  equivalent 
to  22  per  cent,  and  it  is  to  explain  this  fall  in  the  value 
of  silver  that  the  chapters  of  Part  II  were  written.  In 
this  chapter  it  is  intended  to  collect  the  threads  which  have 
been  followed  in  preceding  pages  and  to  present  our  con- 
clusions, based  on  the  historical  evidence  which  has  been 
gathered. 

§  2.  In  the  reasons  heretofore  assigned  for  the  fall  in  the 
value  of  silver,  nearness  to  the  events,  in  my  opinion,  has 
acted  to  magnify  immediate  causes  and  obscure  distant  ones, 
or  those  acting  under  a  general  progress  of  events.  Such  an 
objection,  it  seems  to  me,  is  to  be  urged  against  the  conclu- 
sions reached  by  the  Committee  of  the  House  of  Commons 
which  reported  on  the  "  Depreciation  of  Silver "  in  1876. 
Inasmuch  as  these  conclusions  have  been  quite  generally  re- 
ceived, it  may  be  just  to  include  them  here  before  passing 
on  to  any  criticism  : 

"  Your  Committee  are  of  opinion  that  the  evidence  taken 
conclusively  shews  that  the  fall  in  the  price  of  silver  is  due 
to  the  following  causes : 

"  (1)  To  the  discovery  of  new  silver  mines  of  great  rich- 
ness in  the  State  of  ]S'evada. 

"  (2)  To  the  introduction  of  a  gold  currency  into  Ger- 


THE  CAUSE  OF  THE  FALL  IN  THE  VALUE  OF   SILYEK.  1G5 

many  in  place  of  the  previous  silver  currency.  Tliis  opera- 
tion commenced  at  the  end  of  1871. 

"  (3)  To  the  decreased  demand  for  silver  for  export  to 
India. 

"  It  should  be  added : 

"  (4)  That  the  Scandinavian  governments  have  also  sub- 
stituted gold  for  silver  in  their  currency. 

"  (5)  That  the  Latin  Union,  comprising  France,  Belgium, 
Switzerland,  Italy,  and  Greece,  have  since  187-i  limited  the 
amount  of  silver  to  be  coined  yearly  in  the  Mints  of  each 
member  of  the  Union,  suspending  the  privilege  formerly  ac- 
corded to  all  holders  of  silver  bullion  of  claiming  to  have 
that  bullion  turned  into  coin  without  restriction. 

"  (6)  That  Holland  has  also  passed  a  temporary  act  pro- 
hibiting, except  on  account  of  the  Government,  the  coining 
of  silver,  and  authorizing  the  coining  of  gold. 

"  It  will  be  observed  that  two  sets  of  causes  have  been 
simultaneously  in  operation.  The  increased  production  of 
the  newly  discovered  mines,  and  the  surplus  silver  thrown 
on  the  market  by  Germany,  have  affected  the  supply.  At 
the  same  time  the  decreased  amounts  required  for  India,  and 
the  decreased  purchases  of  silver  by  the  members  of  the 
Latin  Union,  have  affected  the  demand.  A  serious  fall  in 
the  price  of  silver  was  therefore  inevitable." ' 

In  this  very  clear  statement,  account  is  taken  of  immedi- 
ate causes,  and  none  whatever  of  the  more  fundamental  causes 
lying  behind  these  operations — causes  which  might  be  sup- 
posed to  show  that  there  was  some  sequence  in  these  events, 
and  that  they  were  controlled  by  a  common  force.  Al- 
though it  is  not  formally  included  in  their  reasons  for  the 
fall  of  silver,  they  have,  however,  hinted  at  some  deeper 
cause.  In  the  first  place,  they  admit  that  the  actual  changes 
in  the  supply  could  not  be  supposed  to  have  brought  about 
so  serious  a  fall  in  the  value  of  silver;  for,  after  having 
formally  given  the  causes  of  the  depreciation  of  silver  as 
already  recited,  the  Committee  qualify  their  report  by  some 

»  "  H.  C.  Report  of  ISYe,"  p.  iv. 


166     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

very  important  statements,  wliicli  to  my  mind  come  very 
much  nearer  tlie  truth  than  their  formal  enumeration  of 
causes:  "It  is,  however,  an  important  and  remarkable  fact 
.  .  .  that,  though  the  increased  production  of  silver  in  the 
United  States  is  a  fact  beyond  question,  no  actual  increase 
of  imports  of  silver  from  the  United  States  to  Great  Brit- 
ain has  taken  place  since  the  year  1873.  .  .  .  Indeed,  the 
amount  of  the  imports  into  Great  Britain  from  the  United 
States  for  the  year  1875 — viz.,  3,092,000Z. — is  the  smallest 
since  the  year  1869.  In  the  same  way,  though  the  new 
currency  laws  of  Germany  affected  a  vast  silver  coinage, 
the  sales  of  silver  actually  made  up  to  the  26th  of  April 
in  the  present  year  [1876]  do  not  appear  to  have  exceeded 
6,000,000?.,  distributed  over  several  years."  ^  This  Com- 
mittee, moreover,  show  that  in  the  early  part  of  the  century 
silver  was  produced,  as  compared  with  gold,  in  the  propor- 
tion of  3  to  1 ;  in  1848,  of  -68  to  1 ;  between  1852  and  1856, 
of  -27  to  1 ;  and  between  1857  and  1875,  of  '68  to  1.  There- 
fore, notwithstanding  the  new  product  of  silver  in  Nevada 
since  1871,  the  relative  production  of  silver  to  gold  has  not 
been  very  different  in  late  years  from  the  relation  in  1848, 
to  say  nothing  of  the  early  part  of  the  century.  Conse- 
quently, the  Committee  decide  ^  "  that  a  review  of  the  rela- 
tions of  the  metals  in  times  past  shews  that  the  fall  in  the 
price  of  silver  is  not  due  to  any  excessive  production  as  com- 
pared  with  goldP  Although  the  fears  of  dealers  may  have 
magnified  the  potential  supply,  we  may,  therefore,  in  agree- 
ment with  this  conclusion,  understand  that  the  fall  was 
not  explicable  on  any  sufficient  grounds  arising  from  an  in- 
creased supply. 

Indeed,  the  Committee  only  touched  upon  the  true  ex- 
planation when,  leaving  the  question  of  supply  and  taking  up 
the  question  of  demand,  they  assert :  "  The  fact  is  that,  as 
was  correctly  pointed  out' by  Mr.  Giffen  in  his  evidence,  the 
changes  have  been  in  the  uses  of  the  metals.  Gold  has  come 
more  generally  into  use  than  before,  and,  indeed,  the  condi- 

"  H.  C.  Report  of  1876,"  p.  v.  « Ibid. 


THE   CAUSE   OF  TBE  FALL   IN   THE  VALUE   OF  SILVER.  167 

tion  of  trade  and  the  situation  of  various  countries  using  gold 
and  silver  respectively  Lave  entirely  changed."  ^ 

§  3.  A  change  in  the  uses  of  the  metals  has  undoubtedly 
taken  place  ;  and  the  cause  of  it  is  to  be  sought  in  the  natural 
forces  which  underlie  the  processes  of  exchange  and  trade. 
The  increase  of  commerce  and  the  need  of  making  large  pay- 
ments in  wholesale  transactions,  while  it  has  developed  the 
check  and  clearing-house  system,  and  all  banking  devices''' 
by  which  the  risk  in  the  actual  handling  of  large  sums  of 
metallic  money  has  been  avoided,  has  at  the  same  time  in- 
creased the  demand  for  that  one  of  the  two  precious  metals 
which  has  the  greatest  value  in  the  smallest  bulk.  This  is 
the  modern  form  of  the  preference,  or  prejudice,  for  gold  as 
compared  with  silver,  and  it  is  most  evident  in  the  countries 
which  have  the  largest  commercial  interests  at  stake. 

This  being  the  character  of  the  monetary  desires  of  modern 
nations,  the  opportunity  of  satisfying  these  desires,  rendered 
possible  to  a  very  large  extent  by  the  enormous  production  of 
gold  since  1850,  has  been,  in  my  judgment,  the  cause  of  the 
fall  in  the  value  of  silver.  The  situation,  in  brief,  was  this : 
In  1850  the  "Western  world  possessed  a  certain  sum  of  both 
gold  and  silver  (with  the  exception  of  England  and  the 
United  States,  chiefly  silver)  in  use  as  a  medium  of  exchange, 
both  metals,  be  it  observed,  being  in  use  for  a  common  pur- 
pose— the  interchange  of  goods.  ISTow,  there  was  suddenly 
added  in  1850-1875  about  $3,000,000,000  of  gold.  What 
was  the  effect  ?  A  very  simple  and  natural  increase  in  the 
use  of  gold  by  all  the  countries  which  could  get  it.  But  just 
to  the  extent  to  which  the  desire  for  gold  could  be  satisfied 
by  countries  which  had  hitherto  used  silver  wholly  or  in  part, 
so  far  was  the  demand  for  silver  as  a  medium  of  exchange 

'  "  H.  C.  Report  of  1876,"  p.  v. 

*  Mulhall's  "  Dictionary  of  Statistics  "  states  that  since  1840  the  banking  of 
the  world  has  increased  eleven-fold,  or  three  times  faster  than  the  increase  of 
commerce,  and  thirty  times  faster  than  population.  That  in  1861-1870  the  pre- 
cious metals  required  for  the  interchange  of  the  sea-borne  commerce  of  the  world 
was  12  per  cent  of  the  transactions,  and  in  1871-1880  only  8  per  cent. 


168  THE  LATE  FALL  IN  THE  VALUE  QF  SILVER. 

diminislied.  The  new  gold,  therefore,  because  it  was  always 
preferred  to  silver,  pushed  it  out  of  place,  and,  bj  tilling  the 
vacancy,  took  away  from  silver  a  part  of  the  previous  de- 
mand for  the  heavier  metal.  To  the  mind  of  the  commercial 
world  it  was  a  substitution  of  a  more  convenient  for  a  clum- 
sier medium  of  exchange.  In  considering  this  movement  in 
monetary  progress,  and  comparing  it  with  similar  events  in 
industrial  progress  in  almost  every  branch  of  activity,  no 
illustration  seems  to  me  more  exactly  to  describe  the  change 
caused  by  the  introduction  of  the  new  gold  than  that  of 
steam.  In  former  days  the  world  carried  on  its  exchanges 
by  the  slow,  uncertain,  and  clumsy  methods  of  coaches, 
wagons,  and  sails ;  now  all  is  done,  at  less  expense,  more 
rapidly  and  conveniently,  by  railways  and  steamships.  Both 
coaches  and  railways  existed  to  transfer  passengers  and 
freight ;  so  both  gold  and  silver  were  used  to  interchange 
goods.  Formerly  coaches  were  our  chief  dependence ;  so 
was  it  with  silver.  In  later  years  the  railway  has  supplanted 
the  coach  because  it  does  the  same  service  much  better,  leav- 
ing the  coach  to  do  minor  work  in  other  directions ;  in  the 
same  way  gold  is  supplanting  silver  because  it  serves  the 
needs  of  commerce  better,  and  silver  is  relegated  to  use  as 
subsidiary  coin  for  retail  transactions.  Consequently,  when 
there  is  offered  to  a  commercial  country  the  choice  between 
using  gold  and  using  silver,  we  should  as  soon  expect  it  to 
prefer  silver  as  we  should  expect  merchants  to-day  to  send 
their  goods  from  JSTew  York  to  Chicago  by  wagons  instead  of 
by  railway.  This  is  the  tendency  among  modern  states  to 
which  we  wish  to  call  attention.  Inasmuch  as  the  production 
of  gold  from  1850  to  1875  was  as  great  as  in  the  357  years 
preceding  1850,  it  can  easily  be  seen  what  an  opportunity  was 
given  to  gratify  the  universal  preference  for  gold  to  silver, 
coming  as  it  did  at  the  opportune  moment  when  commerce 
began  to  expand  in  an  unusual  degree.  To  the  extent  of  the 
surplus  gold  this  absorption  of  gold  could  go  on  without  in- 
terfering with  its  value,  except  to  keep  it  from  a  fall.  This 
is  a  striking  fact  in  monetary  history :  increase  the  produc- 


THE   CAUSE  OF  THE   FALL  IN  THE  VALUE   OF  SILVER.  169 

tion  of  gold  enormously,  and  it  is  eagerly  absorbed,  and  so 
does  not  undergo  much  depreciation ;  but  if  the  production 
of  silver  be  increased  to  the  same  extent,  it  is  not  permitted 
to  displace  gold  in  the  commercial  states,  as  in  the  case  of 
gold ;  and  the  increase  of  silver  only  creates  distress  to  know 
whether  the  usual  outlets  for  silver  in  the  East  are  sufficient 
to  carry  off  the  surplus. 

Thirty-five  years  ago  England  and  Portugal  alone  ^  had 
a  legal  gold  standard ;  all  other  countries,  either  by  law  or 
by  the  effect  of  circumstances,  employed  a  silver  currency. 
The  United  States  had  a  double  standard  with  but  little 
silver  in  use  ;  but  Germany,  France,  and  the  countries  of 
Continental  Europe  had  a  silver  medium.^  To-day  the  situa- 
tion is  entirely  reversed.  In  Europe  there  is  not  a  Mint 
open  to  the  free  coinage  of  silver.  Gold  has  unquestion- 
ably become  the  only  real  medium  of  exchange  for  commer- 
cial Euroj^e.  And  all  this,  I  contend,  has  been  brought  about 
by  two  things^ :  the  commercial  preference  for  gold,  and  the 
extraordinary  production  of  gold  in  California  and  Australia. 

'  "  It  used  to  be  said  until  a  few  years  ago  that  England  and  Portugal  were 
the  only  countries  where  gold  was  the  standard  of  value  ;  and  there  were  certain 
countries  which  had  a  double  standard,  but  those  were  not  very  many ;  and  all 
the  rest  used  silver.  Silver  is  the  normal  currency  of  the  world,  and  from  a 
natural  cause,  because  silver  is  a  much  cheaper  metal,  and  is  suited  to  those 
small  transactions  which  constitute  the  bulk  of  the  dealings  of  mankind." — W. 
Bagehot,  Q.  1,389,  Report  to  H.  C.  of  1816,  on  "  Depreciation  of  Silver." 

^  "  In  the  Low  Countries  they  struck  gold  ducats  which  circulated  preferably 
abroad  as  merchandise  without  official  value.  Because  of  their  fineness  and  the 
worth  of  their  stamp  they  were  highly  regarded  in  the  Orient,  and  especially  in 
the  Balkan  peninsula ;  but  these  ducats  had  no  circulation  in  the  Low  Coun- 
tries, although  their  coinage  was  free.  The  only  standard  of  the  Kingdom  of 
the  Netherlands  was  really  a  silver  standard.  Russia,  Germany,  Austria,  hke- 
wise  struck  gold  ducats,  f riedrich  d'or,  and  pistoles  for  exportation  ;  but,  like  the 
Low  Countries,  they  employed  at  home  only  silver  money.  France  had,  it  is 
true,  bimetallic  legislation  ;  but  its  circulation  consisted  entirely  of  silver.  From 
1789  to  1848  she  had  struck  about  four  thousand  millions  of  francs  of  silver 
money,  while  the  amount  of  gold  coined  during  the  same  period  was  only  one 
thousand  millions.  Generally,  in  Europe,  gold  bore  a  premium  ;  generally,  the 
circulation,  both  domestic  and  foreign,  was  made  up  of  silver." — Dr.  0.  J.  Broch, 
"French  Report  of  Mon.  Conf.  of  1881,"  i,  p.  39. 

2  Cf.  also  chap,  viii,  §  6. 


170     THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

In  proportion  as  gold  found  a  market,  silver  was  deprived  of 
one,  since  they  were  both  in  use  for  the  same  purpose. 

§  4.  The  operation  of  this  cause,  which  has  thus  been 
only  generally  stated,  may  now  be  traced  more  in  detail  in 
each  of  the  monetary  events  which  have  happened  since 
1850 ;  and  I  trust  that  the  grounds  for  my  conclusion  may 
be  clearly  seen  in  the  history  of  these  last  thirty-five  years. 

The  first  in  the  series  of  events,  after  the  action  of  the 
United  States  in  1853,  caused  by  the  new  gold  was  the  dis- 
placement of  silver  by  gold  in  France  as  early  as  1865.  The 
willingness  of  France  to  take  gold  and  give  up  silver  sus- 
tained the  value  of  the  former,  and  to  the  same  extent  de- 
prived the  latter  of  a  market.  In  other  words,  France,  from 
1853  to  1865,  first  began  the  movement  in  Europe  against  sil- 
ver ;  and  the  latter  would  at  that  time  have  felt  the  effects  of 
this  change  in  demand  by  a  fall  in  value,  had  not  the  excep- 
tional circumstances  connected  with  the  "cotton  famine"  in 
England,  and  the  extraordinary  shipments  of  silver  to  India 
from  1861  to  1866,  served  to  find  a  new  market  to  counter- 
balance the  loss  of  an  old  one. 

In  the  whole  progress  of  this  monetary  revolution  caused 
by  the  new  gold,  whenever  the  substitution  of  gold  for  silver 
in  the  West  threw  an  amount  of  surplus  silver  on  the  market, 
the  part  played  by  the  Indian  demand  ^  was  only  so  far  im- 
portant that,  as  the  market  successively  failed  in  the  West, 
the  East  was  anxiously  watched  by  dealers  in  silver  to  see  how 
far  it  could  take  the  surplus  off  the  market  and  permanently 
absorb  it.  It  was  as  if  the  horses,  which  may  have  been 
thrown  out  of  use  by  the  building  of  a  railway  in  the  United 
States,  should  have  been  shipped  off  to  South  America  for 

'  "  Although  the  metallic  drain  to  the  East  is  composed  principally  of  silver, 
the  efflux — at  least  in  its  present  proportions — is  not  the  less  certainly  the  con- 
sequence of  the  increased  production  of  gold,  for  the  silver  of  which  it  consists 
has  been  displaced  from  the  currencies  of  Europe  and  America  by' the  gold  of 
Australia  and  California,  and  the  drain  to  the  East  is  only  not  a  golden  one, 
because  silver  alone  is  in  that  region  the  recognized  standard." — Cairnes,  "  Es- 
says in  Political  Economy,"  p.  99. 


THE   CAUSE   OF  THE  FALL  IN  THE  VALUE  OF  SILVER.  I7I 

sale  in  countries  wliere  railways  had  not  yet  taken  away  the 
use  of  wagons  for  transportation.  But  if  the  South  Ameri- 
can market  should  have  become  sated,  the  price  of  horses  in 
the  United  States  formerly  used  in  transportation  would  fall, 
and  fall  in  proportion  to  the  curtailed  demand  at  home. 
India  and  the  East,  therefore,  play  the  part  in  this  move- 
ment of  silver  as  a  drainage-ground  for  the  West ;  the  ques- 
tion always  is  whether  the  East  can  absorb  as  fast  as  the 
West  produces  or  discards  silver. 

As  we  have  said,  France  began  the  march  away  from 
silver  to  gold  (unless  we  place  the  United  States  ahead  in 
1853).  In  1867  the  International  Monetary  Conference,  in 
its  recorded  preference  for  the  single  gold  standard,  but  ex- 
pressed the  universal  tendencies  of  commercial  nations  at 
that  time.  When  Germany  anticipated  France^  in  estab- 
lishing a  single  gold  standard  in  1871-1 873,  thus  following 
the  advice  of  the  Conference  of  1867  in  that  respect,  another 
mass  of  silver  was  thrown  on  the  world's  hands.  Could  this 
sum  be  drained  off  to  the  East?  As  we  have  seen,  by  1870 
India  could  not  take  as  much  silver  as  before,  owing  to  its  in- 
debtedness to  England.  The  value  of  silver  accordingly  began 
to  fall ;  but  it  fell  not  in  proportion  to  the  sales  ^  of  silver  by 
Germany  (for  the  price  did  not  rise  when  the  sales  stopped), 

'  "  M.  Chevalier  appears  to  assume  that,  when  the  process  now  [1860]  going 
on  in  Franco  is  completed,  all  further  substitution  of  one  metal  for  another  will 
be  at  an  end,  and  that  the  action  of  future  supphes,  concentrated  on  gold  alone, 
will  tell  in  the  depreciation  of  this  metal  with  proportionate  effect.  But  we 
question  the  correctness  of  this  assumption.  "We  are  inclined  to  think  that  the 
substitution  of  gold  for  silver  in  France  is  only  a  very  striking  example  of  a  pro- 
cess which  has  been  in  unobserved  operation  over  a  much  wider  area,  and  which 
will  continue  after  the  French  movement  has  ceased.  In  India,  where  there  is 
an  immense  silver  currency,  the  process  has  already  begun,  and  signs  are  not 
wanting  that  it  will  soon  assume  more  important  dimensions." — Cairnes,  "Essays 
in  Political  Economy,"  p.  144. 

*  The  sales  of  silver  by  Germany,  taken  by  themselves,  can  not  be  said  to  be 
the  chief  cause  of  the  depreciation  in  silver,  because  other  events  must  have  had 
greater  importance.  Between  18*71  and  1879  the  production  of  silver  amounted 
to  $750,000,000 ;  the  sale  of  India  Council  Bills  to  $500,000,000 ;  while  the 
Bales  by  Germany  in  all  only  rose  to  $141,000,000. 


172  THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 

but  in  such  a  determined  headlong  descent,  when  in  1 8Y4  the 
Latin  Union  suspended  free  coinage  of  silver,  as  to  indicate 
fear  so  very  decided  that  it  could  have  had  its  roots  only  in 
some  deeper  reason  than  the  actual  demonetization  of  silver. 
That  is,  the  German  sales  did  not  much  depress  silver ;  but 
when,  in  addition  to  the  German  monetaiy  reform,  the  whole 
Latin  Union  decided  to  give  up  silver  rather  than  lose  their 
gold,  it  became  clear  that  the  new  gold  had  begun  to  have 
its  perfect  work.  I  can  not  think  that  the  fall  of  silver  is 
to  be  attributed  to  the  action  of  Germany  alone,  or  to  the 
suspension  of  silver  coinage  by  the  Latin  Union  alone  (but  if 
to  any  one  thing  alone,  then  chiefly  to  the  action  of  the  Latin 
Union) ;  but  to  the  displacement  of  silver  by  the  new  gold, 
which  had  by  this  time  accumulated  momentum  enough  to 
reach  a  large  mass  of  the  silver  currency  of  Europe,  and  so 
to  disclose  what  was  to  be  the  tendency  of  things  in  modern 
states.  To  assign  the  incentive  to  Germany  is  to  ignore  the 
real,  and  to  magnify  the  indirect  or  secondary,  cause.  During 
a  recent  hurricane  in  a  small  village  a  man  in  the  street  was 
overwhelmed  by  the  flying  timbers  of  a  house  and  instantly 
killed.  If  it  had  been  said  that  the  man  came  to  his  death 
by  a  piece  of  falling  timber,  the  statement  would  have  been 
correct,  but  it  would  not  have  given  the  true  cause,  which 
was  that  the  man  came  to  his  death  by  the  hurricane.  If  he 
had  not  been  killed  by  that  one  piece  of  timber,  he  would 
have  been  by  any  one  of  several  others,  all  of  which  had 
been  set  in  motion  by  the  original  disturbing  cause,  the  hur- 
ricane. So  in  regard  to  the  fall  of  silver  after  the  demoneti- 
zation by  Germany.  It  might  be  said  that  in  18Y2  and  1873 
the  fall  began  ;  this  forced  the  Latin  Union  to  suspend  coin- 
age ;  and  so  it  may  be  said  that  silver  fell  because  Germany 
demonetized  silver.  And  the  answer  is  true ;  but  true  only 
in  so  far  as  it  was  true  to  say  that  the  man  above  referred  to 
was  killed  by  a  piece  of  timber.  If  we  stop  there  the  whole 
truth  is  not  told.  "We  need  to  be  told  that  the  hurricane  set 
the  timbers  in  motion ;  so  we  need  to  be  told  that  the  new 
gold  set  in  motion  a  displacement  of  silver,  M^hich  must  eon- 


CHART  XIV. 


MONTHLY  FLUCTUATIONS  IN  THE  VALUE  OF  SILVER,  1876-1879. 

> 

o 

h 
O 

O 
O 

O 

o 

h 

15H 
16 

17 

ITK 

18 

18« 
19 

19H 
20 

t- 

Feb. 
Mar. 
Apr. 

May. 
June. 
July.    QO 

3 

-<  M  o   !?;  P   i-s  fc 

Mar. 
Apr. 
May. 

1877 

3    3^5 

1-5  1-5    -q    a 

Oct. 
Nov. 
Dec. 

Jan. 
Feb. 
Mar. 

1^78. 
•<^  1=,    ^  <H   m    o 

Nov. 

Dec. 
Jan. 

Feb. 
Mar. 
Apr. 

1879. 

Sept. 

Oct. 
Nov. 

8 
P 

15« 

16 

16ilS 

17 

17M 

18 

181^ 

19 

19!* 
20 

o 

H 
o 
-1 
o 
o 

o 
o 

1- 
< 

- 

V, 

V 

/ 

V 

^-.^ 

-^ 

. 

s. 

v 

r-y 

.    / 

/      ^ 

^ 

V 

THE  CAUSE  OF  THE  FALL  IN  THE  VALUE  OF  SILVER.  I73 

tinue  as  long  as  any  surplus  gold  remained ;  and  that  as  this 
new  supply  made  it  possible  for  Germany  to  put  herself  on 
an  equal  basis  of  gold  with  commercial  states  like  England 
and  the  United  States,  and  to  satisfy  the  universal  preference 
for  gold,  it  left  the  discarded  silver  to  find  its  own  market ; 
that,  as  a  consequence  of  there  being  no  unlimited  absorp- 
tive power  in  India,  this  silver  (or  the  possible  rather  than 
the  actual  amount)  fell  with  a  heavy  weight  on  its  own 
market  and  depressed  the  price. 

The  action  of  the  Latin  Union  in  1874  and  in  1878  was 
only  a  further  register  of  events  of  the  same  kind ;  inasmuch 
as  it  meant  that  states  which  held  large  amounts  of  silver, 
and  so  would  have  done  what  they  could  for  the  maintenance 
of  its  value  on  selfish  grounds,  had  decided  to  keep  possession, 
of  their  gold.  It  meant  that  there  was  no  longer  any  market 
whatever  for  silver  in  Europe.  The  territory  formerly  oc- 
cupied by  silver  was  invaded  by  gold  (first  Germany,  and 
then  the  Latin  Union),  and  silver  was  obliged  to  retreat 
either  to  India  and  the  East,  or  submit  to  a  feeble  decline 
from  lack  of  attention.  Just  in  proportion  as  the  gold,  aug- 
mented in  quantity  since  1850,  covered  more  territory,  in  that 
proportion  silver  was  shut  off  from  gaining  nourishment  for 
its  life  from  that  district,  and  obliged  to  subsist  on  a  narrower 
space  ;  and  now  that  space  seems  to  be  narrowing  still  more. 
The  general  influence  of  these  causes  may,  therefore,  be  seen 
not  merely  in  the  sudden  fall  of  silver  in  1876,  but  in  the  sub- 
sequent downward  tendency  of  the  value  of  silver  after  1876, 
as  shown  in  Chart  XIV.  This  chart  shows  the  monthly  fluctu- 
ations ^  of  silver  from  the  beginning  of  1876  to  the  end  of  1879. 
It  will  be  noticed  that  the  general  movement  of  which  I  have 
been  speaking,  not  manifesting  itself  in  one  event,  but  in 
many,  has  not  felt  the  influence  of  a  single  counteracting 
cause  like  that  of  the  attempt  of  the  United  States  in  1878  to 
uphold  the  price  of  silver  by  passing  the  Bland-Allison  Bill. 

All  the  appeals  of  later  days  for  bimetallism  have  united 
in  demanding  a  remonetization  of  silver  by  all  the  above- 

'  For  the  figures  see  Appendix  II,  E  and  F. 
13 


174 


THE  LATE  FALL  IN  THE  VALUE  OF  SILVER. 


mentioned  countries,  in  order  to  reinvigorate  tlie  value  of 
silver.  Things,  liovrever,  can  not  go  back  to  the  former 
status  unless  we  eradicate  the  preference  for  gold,  and  an- 
nihilate the  enormous  production  of  gold  in  the  last  thirty- 
five  years.  The  countries  having  gold  do  not  complain  of  any 
disadvantage  in  their  situation ;  it  is  the  countries  like  France 
and  the  United  States,  which,  having  silver  to  dispose  of  and 
to  protect,  want  something  to  be  done  to  save  them  from 
the  loss  due  to  the  late  depreciation.  The  drift  of  events,  in 
my  judgment,  is  against  them,  and  they  must  suffer  for  their 
lack  of  foresight  in  not  avoiding  their  present  predicament. 

Of  course,  the  natural  result  of  this  neglect  of  silver  as 
a  medium  of  exchange  is  to  turn  all  eyes  toward  gold,  and  to 
consider  whether  there  is  enough  gold  for  all  countries  should 
they  all  adopt  the  single  gold  standard.  I  shall  not  attempt 
to  answer  that  question  here.  My  object  now  is  only  to  dis- 
cover what  has  been  the  cause  of  the  late  fall  in  the  value  of 
silver ;  but  a  resume  of  the  series  of  events  which  I  have  de- 
scribed in  Part  II  as  acting  on  the  value  of  silver  may  profit- 
ably be  arranged  in  the  following  form  [000,000  omitted]  : 


EVENTS. 

Gold. 

SiLVEE. 

Demand. 

Supply. 

Demand. 

Supply. 

1816 

1850-64.. 
1867 

England  established   single  gold 
standard 

France  exchanges  silver  for  gold. 

International    Monetary   Confer- 
ence favored  single  gold  stan- 
dard   

[$125] 
1,163 

414 
440 

$1,000 

$345 

1871-73.. 
1852-75.. 
1874.... 

Germany    exchanged   silver    for 
gold 

India   absorbed   both   gold    and 
silver 

Latin  Union  suspended   coinage 
of  silver 

141 
[270] 

1871-76.. 

Denmark  and  Scandinavia 

Production  of   silver   in   United 
States  in  excess  of  previous  av- 
erage production,  1871-76... 

Total 

9 

100 

$2,017 

$1,000 

$595 

Addition  of  gold,  1850-1876 

Addition  of  silver,  1850-1876. . . 

$3,000 

$1,200 

THE  CAUSE  OF  THE  FALL  IN  THE  VALUE  OF  SILVER.  175 

This  statement,  therefore,  leaves  about  $1,000,000,000  of 
the  new  gold  mined  from  1850  to  1875  still  to  be  accounted  ^ 
for,  and  which  might  have  been  absorbed  into  already  exist- 
ing gold  currencies  to  satisfy  any  needs  arising  from  the 
growth  of  commerce  not  met  by  the  growth  of  banking  de- 
vices. This  showing  does  not  indicate  a  "  gold  famine  "  at 
present,  although,  on  the  other  hand,  it  discloses  a  large  sur- 
plus of  about  $800,000,000  of  silver  left  to  find  a  place  in  the 
market. 

1  The  amount  of  $125,000,000  claimed  by  Mr.  Horton  as  constituting  a  new 
demand  I  do  not  admit  as  such ;  but  I  insert  it  in  brackets  in  the  table  as  a 
matter  which  has  been  considered  as  a  new  demand.  Likewise,  in  the  case  of 
Germany,  I  insert  the  whole  possible  supply  of  silver  in  brackets.  I  need 
scarcely  add  that  this  table  does  not  attempt  to  do  more  than  approximate  to 
the  actual  state  of  things  about  1876 ;  but  yet  I  believe  it  gives  the  general  situ- 
ation with  sufficient  exactness  to  serve  our  purpose. 


PAET    III. 


THE  UNITED   STATES,    1873-1885. 


PART     III. 

THE  UlNlTED  STATES,  1873-1885. 


CHAPTER  XIII. 

SILVER   LEGISLATION    IN    1878. 

§  1.  "We  now  take  up  the  story  of  tlie  double  standard  in 
the  United  States  where  we  left  it  after  the  passage  of  the 
act  of  1873,  by  which  the  coinage  of  the  silver  dollar  was 
discontinued. 

As  after  the  legislation  of  1853,  so  for  a  time  after  the 
legislation  of  1873,  there  was  complete  acquiescence  in  the 
result.  Our  country  was  still  laboring  under  the  burdens  of  a 
depreciated  paper,  and  gold  was  not  in  circulation  except  for 
the  payment  of  customs ;  so  that  neither  the  silver  dollar, 
which  was  worth  more  than  a  gold  dollar,  nor  the  gold  pieces 
could  have  been  in  circulation  concmTcntly  with  the  depre- 
ciated United  States  notes.  The  acquiescence  in  the  dropping 
of  the  silver  dollar  from  our  hst  of  coins  has  been  sometimes 
attributed  to  the  fact  that  we  had  only  a  paper  medium,  and 
that  no  attention  was  ever  paid  to  the  relations  of  gold  and 
silver  coins,  which  were  never  seen  in  use.  This,  however, 
was  not  the  reason.  It  was,  simply,  that  the  silver  dollar 
was  worth  more  than  the  gold  dollar.  There  was  no  urgency 
whatever  manifested  to  pay,  or  for  the  privilege  of  pay- 
ing in  the  future,  with  the  dearest  of  two  legal  coins.  It 
was  not  until  the  fall  of  silver  in  1875  and  1876  that  the  first 
suggestions  were  made  for  a  recoinage  of  silver  dollars.  "What 
is  more,  paper  money  still  occupied  the  field  in  these  years, 


180  THE  UNITED   STATES,   18Y3-1885. 

and  gold  and  silver  were  not  yet  in  circulation.  So  that  it 
was  not  because  gold  and  silver  were  circulating  in  1876  tliat 
attention  was  called  to  the  position  of  our  coins  established 
in  1873  any  more  than  that  the  acquiescence  in  the  act  of 
1873  had  been  before  due  to  the  presence  of  paper  money 
and  to  the  absence  of  a  metallic  circulation. 

§  2.  In  our  preceding  chapters  of  Part  II  an  attempt  was 
made  to  point  out  the  events  which,  since  1850,  had  affected 
the  value  of  silver  and  gold,  and  to  account  for  the  dimin- 
ished value  of  silver,  which  began  to  fall  in  1872,  culminated 
in  1876,  and  has  continued  with  fluctuations  to  the  present 
year,  1885.  We  saw  that  the  new  gold  had  taken  away  from 
silver  a  place  for  its  employment  in  several  states  of  western 
Europe ;  that  silver,  crowded  out  by  its  superior  as  a  me- 
dium of  exchange,  was  being  abandoned  by  the  chief  com- 
mercial nations ;  and  that  the  Latin  Union,  accustomed  as 
they  had  been  to  silver,  and  holding  as  they  did  large  amounts 
of  silver,  preferred  not  to  give  up  gold,  but  had  stopped  the 
free  coinage  of  silver  in  1874,  and  wholly  ceased  to  coin  it 
in  1878.  What  the  tendency  of  the  value  of  silver  was,  and 
what  the  situation  was  when  the  United  States  plunged  into 
the  arena,  may  be  seen  by  Chart  XY.  The  United  States 
took  uj)  the  cause  of  silver  in  1878,  and  the  chart  will  show 
whether  the  value  of  silver  was  affected  by  this  action.  In 
fact,  the  line  continued  to  drop  after  1878  as  it  had  been  drop- 
ping before.  When  not  a  state  in  Europe  dared  open  its  Mint 
to  silver,  at  this  very  time  ^  the  United  States  stupidly  came 
forward  and  made  the  attempt  to  support  the  value  of  silver 
quite  by  itself.  It  is  recorded  that  a  very  muscular  and  will- 
ing workman,  engaged  with  several  others  in  raising  a  huge 
stone  to  its  place  by  means  of  ropes  and  pulleys,  observed  that 
the  others  had  suddenly  let  go  their  hold  on  the  ropes,  and 

'  "  There  is  no  reason  why  we  should  move  now,  except  that  given  by  the 
man,  when  met  with  the  question  of  an  irate  wife  as  to  why  he  came  home  so 
late  at  night,  who  answered,  '  Because  all  other  places  are  shut  up.' " — Senator 
Morrill,  "  Globe,"  vol.  vii.  Part  I,  2d  session,  45th  Congress,  p.  616.  Hereafter, 
in  speaking  of  this  volume  of  the  "  Globe,"  I  shall  refer  to  it  as  vol.  cxxxvi. 


CHART  XV. 


1870 
1871 
1872 
1873 
1874 
1875 
,1876 
1877 
1878 
1879 
1880 
1881 
1882 
1883 
1884 

15 

FALL  IN 

THE  VALUE  OF  SILVER, 

15 

15Ja' 

1870- 

-1884. 

1514 

16 

\ 

16 

'v 

\ 

a: 

UJ 

> 

m 
O 
1- 
Q 

~i 
O 

o 

u. 
O 
O 

1- 
< 
q: 

17 

\ 

16^ 
17 

1% 

> 
-1 

m 
o 

1- 

Q 

O 
O 
ti. 

o 
o 

H 
< 
DC 

1 

\ 

1      /    ' 

n 

\ 

18 

\ 

18 

\        / 

^^^-'"^ 

isy^ 

V 

\ 

ISJfJ 

\ 

V-'' 

19 

19 

15.57 
15.57 

15.65 
15.92 
16.17 

17.22 
17.92 
18.39 
18.06 
18.24 
18.21 
18.64 
18.58 

SILVER  LEGISLATION  IN   1878.  181 

tliat  the  heavy  mass  was  beginning  to  fall :  confident  of  his 
strength,  he  by  himself  laid  hold  of  the  rope  and  tried  to 
sustain  the  weight  by  his  unaided  power.  The  momentum  of 
the  falling  stone  was  more  than  he  could  overcome ;  he  was 
thrown  upward,  flung  to  the  ground,  and  injured  for  life. 
The  action  of  the  United  States  was  of  a  similar  character. 
It  undertook  to  do  what  all  the  rest  of  the  world  without  us 
had  not  been  able  to  do — namely,  to  keep  up  the  value  of 
silver  in  the  face  of  the  increased  supply  of  gold.  We  may 
break  the  fall  of  silver,  but  we  shall  imperil  ourselves.  We 
shall  lose  by  buying  millions  of  a  commodity  which  we  must 
sell  at  a  great  sacrifice,  the  greater  as  we  sell  the  more.  So 
bold  and  daring  an  attempt,  so  utterly  unwarranted  by  any 
financial  wisdom,  seems  almost  inexplicable  to  the  student  of 
economic  history.  So  extraordinary  a  piece  of  legislation, 
therefore,  demands  as  fair  and  cool  an  analysis  of  the  reasons 
which  caused  its  passage  as  we  are  able  to  give. 

§3.  In  the  summer^  of  IS 76  a  crop  of  silver  bills  came 
up  in  the  House.  July  18,  1876,  Mr.  W.  D.  Kelley  intro- 
duced ^  a  bill  to  coin  the  standard  silver  dollar  and  to  restore 
its  legal-tender  character,  which  was  the  original  of  the 
measure  finally  passed.  A  similar  bill  was  introduced^  by 
Mr.  Bland,  July  25,  1876,  and  vigorously  discussed  by  Mr. 
Hewitt  on  August  5th.  At  the  next  session  of  Congress,  Mr. 
Bland  reported  *  from  the  Committee  on  Mines  and  Mining, 
December  12, 1876,  his  original  bill  ("H.  E.  No.  3,635"),  of 
w^iich  the  chief  sections  are  as  follow : 

"Sec.  1.  That  coin-notes  of  the  denomination  of  $50,  and 
multiples  thereof  up  to  $10,000,  may,  in  the  mode  hereinafter 

'  Mr.  Bright  (Tennessee)  claims  that  he  was  the  first  to  call  attention  to  the 
remonetlzation  of  silver  in  January,  1875.  See  "Globe,"  vol.  vii,  Part  I,  2d 
session,  45th  Congress,  p.  584. 

*  "Globe,"  vol.  iv,  Part  V,  1st  session,  44th  Congress,  p.  4704. 

3  "Globe,"  vol.  iv,  Part  VI,  1st  session,  44th  Congress,  p.  5186.  "  H.  R.  Bill 
No.  3,635." 

*  "  Globe,"  vol.  V,  Part  I,  2d  session,  44th  Congress,  p.  149.  It  will  be  no- 
ticed that  there  is  a  great  similarity  in  the  main  provision  of  Mr.  Bland's  origi- 
nal bill  with  that  which  at  the  present  time  (fall  of  1885)  is  put  forth  as  the  so- 
called  "  Warner  bill."    Both  are  plans  for  the  issue  of  bullion  certificates. 


182  THE   UNITED   STATES,   1873-1885. 

provided,  be  paid  by  the  several  Mints  and  assay-offices  .  .  . 
for  the  net  value  of  gold  and  silver  bullion  deposited  thereat ; 
and  of  the  bullion  thus  received  not  less  than  75  per  cent  in 
coin  or  fine  bars  shall  at  all  times  be  kept  on  hand  for  redemp- 
tion of  the  coin-notes,  gold  for  gold  and  silver  for  silver.  The 
gold  deposited  shall  be  computed  at  its  coining  value,  and 
silver  at  the  rate  of  412"8  grains  standard  silver  to  the  dol- 
lar. .  .  . 

"  Sec.  4.  That  the  coin-notes  issued  under  the  provisions  of 
this  act  shall  be  receivable  without  limit  for  all  dues  to  the 
United  States ;  and  the  coin  mentioned  in  this  act  shall  be  a 
legal  tender  for  all  debts  of  the  United  States,  public  and  pri- 
vate, not  specified  to  be  paid  in  gold  coin. 

"  Sec.  5.  That  the  gold-coin  notes  issued  under  this  act 
shall  be  redeemed  on  presentation  in  gold  coin  or  fine  bars,  and 
silver  in  silver  dollars  or  fine  bars." 

This  bill,  it  will  be  observed,  aimed  rather  at  the  unlim- 
ited issue  of  coin-notes,  based  on  a  fixed  silver  standard. 
But  lie  also  proposed  at  the  same  time  the  following  substi- 
tute, which  was  declared  to  be  the  same  as  that  introduced 
by  Mr.  Kelley  (now  numbered  "  II.  R.  No.  4,189  ")  : 

"  Be  it  enacted,  etc.,  That  there  shall  be  from  time  to  time 
coined  at  the  Mints  of  the  United  States  silver  dollars  of  the 
weight  of  412|^  grains  standard  silver  to  the  dollar,  as  provided 
for  in  the  act  of  January  18, 1837,  and  that  said  dollar  shall  be 
a  legal  tender  for  all  debts,  public  and  private,  except  where 
payment  of  gold  coin  is  required  by  law." 

The  next  day,  December  13,  1876,  the  substitute^  was 
adopted  and  passed  by  a  vote  of  167  to  53.  The  previous 
question  being  ordered,  all  amendments  were  prevented,  and 
the  debate  was  limited  to  two  hours.^     It  will  be  seen,  there- 

'  "  I  confess  that  I  am  in  favor  of  the  bill  as  originally  introduced.  I  agree 
that  the  certificates  authorized  to  be  issued  for  bullion  deposited  in  the  Treasury 
would  take  the  place  of  your  national  bank-notes." — Bland,  "  Globe,"  vol.  v,  Part 
I,  2d  session,  44th  Congress,  p.  172. 

*  "  I  suppose  that  the  officer  of  the  United  States  Army  who  had  charge  of 
the  excavations  at  Hell  Gate,  an  hour  before  the  explosion,  could  have  given 
you  the  lay  of  the  ground  on  every  square  foot  of  Hell  Gate  ledge ;  .  .  .  but  if 
he  had  pretended  to  tell  any  one,  just  after  the  explosion  occurred,  how  the 
ledge  lay,  how  deep  the  water  was,  and  what  the  situation  of  the  channel  was  in 
regard  to  navigation,  he  would  have  proved  himself  a  charlatan  and  a  cheat.  .  ,  . 
But  there  has  been  an  explosion  under  the  silver  question  as  it  stands  related  to 
gold — an  explosion  as  much  greater  than  the  explosion  under  Hell  Gate  ledge 


SILVER  LEGISLATION  IN   1818.  183 

fore,  that  there  was  no  intention  whatever  in  the  House  to 
permit  the  measure  to  be  debated.  The  bill,  however,  re- 
ceived no  attention  from  the  Senate  during  this  session,  and 
further  consideration  of  it  was,  therefore,  postponed  to  an- 
other session  of  Congress. 

The  following  autumn  the  Kelley  bill,  slightly  altered, 
was  again  introduced  in  the  House  (as  "H.  R.  ]^o.  1,093") 
by  Mr.  Bland,  and,  under  a  suspension  of  the  rules,  was 
passed^  without  debate,  I^ovember  5,  1877,  by  a  vote  of  163 
to  34.  The  bill  which  then  passed  the  House  and  was  sent 
to  the  Senate  read  as  follows : 

"  -Be  it  enacted,  etc.,  That  there  shall  be  coined  at  the  several 
Mints  of  the  United  States  silver  dollars  of  the  weight  of  412^ 
grains  troy  of  standard  silver,  as  provided  in  the  act  of  Janu- 
ary 18,  1837,  on  which  shall  be  the  devices  and  superscriptions 
provided  by  said  act ;  which  coins,  together  with  all  silver  dol- 
lars heretofore  coined  by  the  United  States  of  like  weight  and 
fineness,  shall  be  a  legal  tender,  at  their  nominal  value,  for  all 
debts  and  dues,  public  and  private,  except  where  otherwise 
provided  by  contract ;  and  any  owner  of  silver  bullion  may  de- 
posit the  same  at  any  United  States  coinage-mint  or  assay-office 
to  be  coined  into  such  dollars,  for  his  benefit,  upon  the  same 
terms  and  conditions  as  gold  bullion  is  deposited  for  coinage 
under  existing  laws. 

"  Sec.  2.  All  acts  and  parts  of  acts  inconsistent  with  the  pro- 
visions of  this  act  are  hereby  repealed." 

The  bill  reached  the  Senate  December  6, 1877,  was  made 
the  special  order  for  December  11th,  and  thereafter  received 
prolonged  and  full  debate.  In  the  Senate  the  bill  was  in 
charge  of  Mr.  Allison,  of  the  Committee  on  Finance,  who 

as  the  continents  of  Europe,  Asia,  and  America  are  greater  than  Hell  Gate  it- 
self. .  .  .  Now  ...  it  is  proposed,  in  the  hot  haste  of  a  two  hours'  debate, 
under  the  tyranny  of  the  previous  question — the  two  hours  being  parceled  out 
into  fragments  of  five  or  ten  minutes  apiece — it  is  proposed  in  this  chamber 
that  we  settle  this  world-wide  question  and  determine  it  to-day." — Garfield, 
ibid.,  p.  167.     For  the  names  of  the  voters,  see  ibid.,  p.  172. 

•  Among  those  who  voted  Yea  were :  Bland,  Buckner,  Carlisle,  Conger, 
J.  D.  Cox,  S.  S.  Cox,  Crittenden,  Ewing,  Foster,  Goode,  Hubbell,  Hunton,  Keifer, 
Kelley,  Knott,  McKinley,  McMahon,  Morrison,  Reagan,  Springer,  Vance.  Nay : 
Chittenden,  Claflin,  Frye,  Gibson,  A.  S.  Hewitt,  Morse.  See  "  Globe,"  vol.  vi, 
Ist  session,  45th  Congress,  p.  241. 


184:  THE   UNITED   STATES,   18V3-1885. 

reported  the  bill  with  important  amendments,  the  chief  of 
which  was  that  one  taking  away  from  the  House  bill  the 
provision  granting  free  coinage.  The  last  clause  of  the  first 
section  of  the  House  bill  (beginning  "and  any  owner  of  sil- 
ver bullion  ")  was  struck  out,  and  the  following  words  were 
finally  inserted  by  a  vote  ^  of  49  to  22 : 

"  And  the  Secretary  of  the  Treasury  is  authorized  and  di- 
rected to  purchase,  from  time  to  time,  silver  bullion  at  the 
market  price  thereof,  not  less  than  two  million  dollars'  worth 
per  month,  nor  more  than  four  million  dollars'  worth  per 
month,  and  cause  the  same  to  be  coined  monthly,  as  fast  as  so 
purchased,  into  such  dollars  ;  and  a  sum  sufficient  to  carry  out 
the  foregoing  provisions  of  this  act  is  hereby  appropriated  out 
of  any  money  in  the  Treasury  not  otherwise  appropriated.  And 
any  gain  or  seigniorage  arising  from  this  coinage  shall  be  ac- 
counted for  and  paid  into  the  Treasury,  as  provided  under  ex- 
isting laws  relative  to  the  subsidiary  coinage  :  Provided,  That 
the  amount  of  money  at  any  one  time  invested  in  such  silver 
bullion,  exclusive  of  such  resulting  coin,  shall  not  exceed  $5,- 
000,000  :  And  promded  further,  That  nothing  in  this  act  shall 
be  construed  to  authorize  the  payment  in  silver  of  certificates 
of  deposit  issued  under  the  provisions  of  Section  254  of  the 
Revised  Statutes." 

Another  important  amendment,  containing  the  provision 
in  regard  to  silver  certificates,  originated  with  Mr.  Booth 
(California).  In  its  after-effects  this  provision  proved  more 
effective  in  carrying  out  the  purposes  of  the  advocates  of 
silver  than  it  was  expected,  probably,  at  the  time  when  the 
bill  was  passed : 

"  Sec.  3.  That  any  holder  of  the  coin  authorized  by  this  act 
may  deposit  the  same  with  the  Treasurer  or  an}^  assistant  treas- 
urer of  the  United  States,  in  sums  not  less  than  $10,  and  re- 
ceive therefor  certificates  of  not  less  than  $10  each,  correspond- 
ing with  the  denominations  of  the  United  States  notes.  The 
coin  deposited  for,  or  representing,  the  certificates  shall  be  re- 
tained in  the  Treasury  for  the  payment  of  the  same  on  de- 
mand. Said  certificates  shall  be  receivable  for  customs,  taxes, 
and  all  public  dues,  and,  when  so  received,  may  be  reissued." 

The  Senate  also  inserted  a  provision  for  an  international 

*  Among  the  nays,  as  the  more  extreme  silver  advocates  in  the  Senate,  were 
Beck,  Davis  (111.),  Garland,  Jones  (Nev.),  Thurman,  Voorhees. 


SILVER  LEGISLATION  IN  1878.  185 

monetary  conference  ^  of  delegates  from  European  countries  to 
agree  upon  a  common  ratio  between  gold  and  silver.  The 
provision  for  silver  certificates  was  adopted,  49  to  15,  and  the 
whole  bill,  as  thus  amended,  passed  the  Senate,  February  15, 
1878,  by  a  vote*  of  48  to  21. 

The  bill,  as  amended  by  the  Senate,  because  of  the  loss 
of  free  coinage,  proved  very  unsatisfactory  to  the  silver  party 
in  the  House,  when  it  was  returned  to  them  for  concurrence 
in  the  amendments  of  the  Senate.  There  were  many  brief 
protests,  but  the  belief  was  expressed  by  the  advocates  of 
the  bill  that  it  would  be  well  to  take  what  they  could  get 
from  the  Senate  without  delay,  and  then  in  the  future  try 
to  gain  ground  by  adding  more  extreme  provisions  in  other 
bills.  The  measure  was  discussed^  for  an  hour,  and  under 
the  previous  question  was  passed  as  it  came  from  the  Senate. 
The  motion  to  concur  in  the  amendments  of  the  Senate  was 
carried  by  a  vote  *  of  203  to  Y2.  The  test  vote  at  this  time 
was  on  the  motion  to  lay  the  bill  on  the  table,  which  was 
lost  by  a  vote^  of  Tl  to  205. 

The  bill,  having  passed  both  Houses,  was  sent  to  Presi- 
dent Hayes,  who  returned  it,  unsigned,  February  28,  1878, 
accompanied  by  a  veto  message  ^  expressing  his  objections  to 

'  This  was  passed  by  a  vote  of  40-30.  An  amendment  that  the  coinage  of 
silver  dollars  should  not  interfere  with  the  coinage  of  gold  and  subsidiary 
coins  was  lost,  23-46  ;  to  fix  the  number  of  standard  grains  in  the  dollar  at 
425,  instead  of  412|,  which  was  proposed  by  Mr.  Blaine,  was  lost,  23-46  ;  to 
make  it  440  grains,  lost,  18-49;  to  make  it  420  grains,  lost,  25-44  ;  to  limit 
the  legal-tender  power  of  silver  dollars  of  412^  grains  to  $20,  lost,  20-46  ;  to 
exclude  payment  of  duties  and  interest  on  the  public  debt  in  silver  dollars,  lost, 
18-45.  See  "  Globe,"  vol.  vii,  Part  II,  2d  session,  45th  Congress,  pp.  10Y6-1110. 
Hereafter,  in  speaking  of  this  volume,  I  shall  refer  to  it  as  vol.  cxxxvii. 

*  Among  the  yeas  was  Mr.  Windom,  afterward  Secretary  of  the  Treasury  in 
1881. 

3  "  Globe,"  vol.  cxxxvii,  pp.  1243-1285. 

*  Among  the  nays  on  this  motion,  or  those  who  wanted  unlimited  coinage  were 
Blackburn, Butler,  Carlisle,  S.  S.  Cox,  E wing,  Knott,  Mills,  Reagan,  Springer,  Vance. 

^  Among  the  nays  were  Blackburn,  Bland,  Buckner,  Burchard,  Candler,  Car- 
lisle, Conger,  J.  D.  Cox,  S.  S.  Cox,  Ewing,  Foster,  Hanna,  Hiscock,  Hubbcll,  Hunter, 
Keifer,  Kelley,  Mills,  Knott,  McKinley,  Morrison,  Reagan,  Springer,  Tucker,  Vance. 

*  "  Globe,"  vol.  cxxxvii,  pp.  1418, 1419.    See,  also,  infra^  §  6. 


186  THE  UNITED  STATES,   1873-1885. 

the  bill.  In  the  House,  on  the  same  day,  the  bill  was 
promptly  passed  by  a  vote  of  196  to  73,  being  more  than 
the  requisite  two  thirds.  On  the  same  day  the  Senate  like- 
wise passed  the  bill  over  the  veto  of  the  President  by  a  vote 
of  46  to  19,  and  it  became  a  law. 

§  4.  In  order  to  understand  the  existence  of  the  party 
which  in  1878  passed  the  silver  bilV  it  is  necessary  to  keep 
in  view  the  sequence  of  financial  and  political  events  of  the 
preceding  ten  years. 

The  close  of  the  Civil  "War  brought  with  it  the  necessity 
of  determining  upon  some  treatment  of  our  depreciated  paper 
and  the  payment  and  refunding  of  our  huge  national  debt. 
The  speculative  period  following  the  war,  moreover,  had  been 
scarcely  equaled  in  our  financial  history  ;  and  when  it  was 
followed  by  the  inevitable  collapse  of  credit  and  prices  in 
1873,  very  large  numbers  of  our  people  were  caught  in  that 
uncomfortable  position  in  which  they  were  obliged  to  slowly 
and  painfully  pay  back  that  which  they  had  borrowed  in  a 
sanguine  and  speculative  mood.  The  "Western  States  had 
been  largely  interested  in  real  estate  speculations,  and  the 
prosperous  years  after  the  war  gave  them  no  warning  of  a 
coming  downfall.  The  disease  had  acquired  such  a  hold 
throughout  the  country  as  to  demand  a  long  time  within 
which  the  latent  fever  should  burn  itself  out  and  leave  the 
body  healthy,  even  if  weak  and  emaciated.  "Weighed  down 
by  debt,  and  led  by  skillful  politicians,  or  impelled  by  selfish 
interest,  the  people  of  the  West  demanded  that  the  Govern- 
ment should  come  to  the  aid  of  debtors  and,  by  plentiful  is- 
sues of  United  States  notes,  create  an  inflation  which  should 
enable  them  to  get  off  the  shoals  of  debt  on  the  high  tide  of 
rising  prices.  This  claim  of  the  inflationists  was  met  by  the 
wisdom  and  intelligence  of  the  community,  and  a  fierce  and 

'  As  it  now  stands,  the  act  of  1878  ought  to  be  called  the  Allison  bill,  because 
his  amendments  changed  its  whole  character.  As  it  originated  in  the  House 
and  was  first  introduced  by  Mr.  Kellcy,  it  might  properly  be  known  as  the  Kelley- 
Allison  bill ;  but  as  it  was  under  the  charge  of  Mr.  Bland  in  the  House,  it  may 
be  well  to  accept  the  common  usage,  and  speak  of  it  as  the  "  Bland  bill." 


SILVER  LEGISLATION  IN   18Y8.  187 

hot  contest  was  waged,  whicli  resulted  in  the  defeat  of  the 
former,  and  the  veto  of  their  bill  bj  President  Grant  in  1874. 
This  victory  was  followed  up  by  the  Resumption  Act  in  1875. 
Then,  when,  after  our  bonds  had  been  mostly  refunded 
under  the  act  of  1870,  it  became  also  settled  that  the  princi- 
pal and  interest  of  the  Government  obligations  should  be 
paid  in  coin,  the  threat  of  inflation  from  United  States  notes 
seemed  to  have  been  averted.  But,  although  the  inflation- 
ists were  defeated,  the  conditions  yet  existed  which  pro- 
duced the  original  inflation  party.  There  were  the  dema- 
gogues, and  there  were  the  debtors.  From  1876  to  1878, 
during  which  the  silver  discussions  continued,  therefore,  we 
shall  find  it  necessary  to  take  into  account  the  existence  of 
the  old  inflation  party  if  we  hope  to  get  a  rational  explana- 
tion of  the  purpose  of  the  legislation  adopted  in  1878. 

There  was  another,  but  related,  influence  also  which  had 
no  little  force.  The  older  portions  of  the  United  States  have 
naturally  been  the  richest  in  accumulations  of  capital ;  the 
newer  portions  have  naturally  been  the  borrowers.  Yast 
Bums,  consequently,  were  invested  by  the  States  of  the  East 
in  railways,  buildings,  and  all  the  interests  of  a  fertile  coun- 
try like  the  West,  in  loans  to  counties  and  townships, 
while  insurance  companies  and  individuals  loaned  money 
secured  by  mortgages  on  Western  farms.  When  the  crisis 
of  1873  came,  and  debtors,  having  spent  all  the  borrowed 
capital,  were  confronted  with  the  dreary  necessity  of  pay- 
ing back  all  they  had  received,  there  arose  a  feeling  (utterly 
irrational,  but  nevertheless  quite  human)  that  the  creditor 
was  cruel  if  he  demanded  his  own  again.  On  this  account 
there  was,  without  doubt,  a  very  serious  friction  in  the  rela- 
tions between  the  loaning  and  the  borrowing  States.  This 
passed  away  in  later  years,  to  some  extent,  as  the  prosperity 
of  the  West  allowed  them  to  pay  their  indebtedness ;  but,  at 
the  time  of  which  we  are  writing,  the  ancient  antagonism 
between  the  debtor  and  creditor  class  was  distinctly  marked 
out,  not  merely  between  different  classes,  but  between  dif- 
ferent sections  of  the  country.     This  state  of  affairs  was 


18S  THE  UNITED  STATES,    IS'ZS-ISSS. 

eagerly  seized  n^^on  by  ambitious  politicians,  and,  in  their  de- 
sire to  represent  their  constituencies,  they  outbid  each  other 
for  favor  by  exaggerated  appeals  to  this  class  and  sectional 
feeling — a  feeling,  too,  not  founded  on  very  high  standards 
of  honesty.  One  who  has  the  patience  to  follow  through  the 
voluminous  and  exhausting  debates  of  Congress  during  the 
silver  discussions  of  1878  must  see  that  this  factor  of  which 
I  am  speaking  had  a  very  important  place.  We  may  be 
ashamed  of  it,  but  it  was  true.  And  without  an  understand- 
ing of  this  factor  it  is  quite  impossible  to  comprehend  the 
tone  of  the  majority  of  arguments  urged  in  favor  of  the  silver 
bill.  Among  other  things,  for  example,  it  was  said  that  we 
should  soon  hear  "  the  maddened  roar  of  labor  sounding  like 
a  trumpet-blast  of  prophecy." 

§  5.  It  is  scarcely  too  much  to  say  that  the  demand  for 
the  coinage  of  silver  dollars  began  where  the  cry  for  unlim- 
ited paper  money  left  off.  The  movement  which  resulted 
in  the  act  of  1878  was  but  another  manifestation  of  the  same 
desires  which  led  to  the  hot  and  fierce  debates  between  the 
inflationists  and  contractionists.  The  evidence  of  this,  it 
seems  to  me,  is  undeniable  to  any  one  who  will  examine  the 
reasons  urged  in  favor  of  the  Bland  bill  in  the  debates  of 
Congress.  At  the  same  time  that  this  measure  was  before 
the  country  a  bill  was  passed  in  the  House  to  re]3eal  the 
Resumption  Act.  !Not,  of  course,  that  every  member  who 
voted  for  the  silver  dollar  was  opposed  to  resumption  ;  but 
it  was  unmistakable  evidence  of  the  opinions  of  the  ma- 
jority. The  debtor  class  were  catered  to,  and  the  prejudices 
of  class  feeling  invoked  in  favor  of  the  Bland  bill  as  they 
had  been  in  earlier  years  in  favor  of  worthless  paper. 

The  silver  advocates  were  largely  the  advocates  of  ex- 
pansion. Said  Mr.  Ewing^  in  the  House:  "Mr.  Speaker, 
nine  tenths  of  the  people  of  the  United  States  demand  the 
unlimited  coinage  of  the  old  silver  dollar  with  which  to  pay 
their  debts  and  conduct  their  business.  .  .  .    The  country  is 

»  "Globe,"  vol.  cxxxvii,  pp.  1263,  1264. 


SILVER  LEGISLATION  IN   1878.  189 

in  an  agony  of  business  distress,  and  looks  for  some  relief 
by  a  gradual  increase  of  the  currency.  The  House  bill  au- 
thorized not  only  unlimited  coinage,  but  coinage  of  silver 
bullion  owned  by  citizens  for  immediate  use  in  business." 
"If  these  questions  are  not  settled,"  urged  another  mem- 
ber,^ "  and  settled  at  once  or  before  this  present  Congress  ad- 
journs, I  say  to  those  gentlemen  that  from  the  districts  of 
the  West  and  South  will  come  a  class  of  men  who  will  de- 
mand, not  only  that  silver  shall  be  remonetized,  and  that  the 
Resumption  Act  shall  be  repealed,  but  tbat  the  national 
banking  law  shall  be  repealed,  and  the  Government  of  the 
United  States  shall  issue  all  the  money  to  be  in  circulation 
in  this  country."  An  answering  echo  came  from  the  Sen- 
ate ;  ^  "  In  many  sections  of  the  country  it  is  now  question- 
able whether,  under  the  most  favorable  conditions  we  can 
hope  for  in  the  future,  there  can  be  any  escape  from  the  em- 
barrassments that  surround  the  debtor  class  except  through 
bankruptcy.  ...  In  view,  then,  of  the  condition  of  affairs, 
it  seems  to  me  that  any  measure  that  tends  in  any  degree  to 
uphold  the  value  of  property,  or  to  prevent  its  further  de- 
preciation, ought  to  meet  the  support  and  concurrence  of 
all."  When  the  bill  came  back  from  the  Senate  a  Southern 
member^  disclosed  his  position  very  clearly:  "Let  us  force 
a  square  issue  and  make  every  one  array  himself  either  on 
the  side  of  God  or  Mammon — the  people  or  the  gold  ring. 
.  .  .  The  people  are  in  no  humor  to  be  trifled  with,  and  a 
veto  would  prove  a  blessing  if  it  would  have  the  effect  I 
believe  it  would — namely,  to  arouse  a  storm  which  would 
compel  a  complete  remonetization  of  silver  and  the  repeal  of 
the  Resumption  Act."  Another  avowal  *  was  quite  as  frank : 
"  I  heartily  sympathize  with  the  objects  of  this  bill  in  re- 
monetizing  the  silver  dollar  and  thus  increasing  the  volume 
of  our  circulating  medium."     But,  perhaps,  the  coarsest  ex- 

'  Tipton  (Illinois),  ibid.,  p.  602. 

'  McDonald  (Indiana),  "  Globe,"  vol.  cxxxvi,  pp.  957,  958. 
'  Turner  (Georgia),  "Globe,"  vol.  cxxxvii,  p.  1278. 
4  Henderson  (Illinois),  ibid.,  p.  1279. 
14 


190  THE  UNITED   STATES,   1873-1885. 

presslon  of  this  sentiment  was  reserved  for  tlie  lips  of  Mr. 
Bland,^  who  declared:  "I  give  notice  here  and  now  that 
this  war  shall  never  cease,  so  long  as  I  have  a  voice  in  this 
Congress,  until  the  rights  of  the  people  are  fully  restored 
and  the  silver  dollar  shall  take  its  place  alongside  the  gold 
dollar.  Meanwhile  let  us  take  what  we  have  and  supple- 
ment it  immediately  on  appropriation  bills,  and,  if  we  can 
not  do  that,  I  am  in  favor  of  issuing  pajper  money  enough  to 
stuff  down  the  hondholders  until  they  are  sick  [Applause]." 

Much  more  evidence  could  be  cited,  if  more  were  neces- 
sary, to  show  that,  in  the  minds  of  a  very  large  number  of  men 
who  urged  the  passage  of  the  Bland  bill,  there  was  a  hope 
that  they  might  expand  the  currency  by  its  provisions;  and 
even  that  silver  dollars  would  be  extensively  added  to  the 
circulation  and  create  the  same  effects.  In  fact,  Mr.  Bland's 
original  bill  aimed  rather  at  an  issue  of  a  new  kind  of  legal- 
tender  paper,  limited  only  by  the  quantity  of  silver  bullion 
capable  of  deposit,  than  at  the  legitimate  union  of  gold  and 
silver  at  a  ratio  which,  in  the  beginning  at  least,  should  assure 
their  concurrent  circulation. 

In  fact,  one  is  struck,  on  every  page  of  the  debates,  with 
the  radically  different  temper  in  which  the  subject  of  the 
coinage  was  treated  in  1878  from  that  shown  in  1853,  or 
even  in  1792.  There  is  not  a  shadow  of  a  doubt  that,  had 
silver  not  fallen  in  value  in  1876,  so  that  a  dollar  of  silver 
had  not  become  worth  much  less  than  a  gold  or  paper  dollar 
— and  so  afforded  a  new  device  for  meeting  existing  debts, 
which  at  the  same  time  was  technically  coin — we  should  never 
have  heard  much  of  the  silver  agitation.^  It  was  born  of  a 
desire  for  a  cheap  unit  in  which  to  liquidate  indebtedness. 

>  "Globe,"  vol.  cxxxvii,  p.  1250. 

*  The  "Cincinnati  Gazette,"  in  June,  18*77,  said:  "This  notion  got  a  start 
and  great  momentum  from  the  apparent  showing  that  it  was  cheaper  than  the 
greenback  dollar.  The  promise  of  a  specie  dollar  for  payment  of  the  bond- 
holder and  of  all  the  '  creditor  class,'  cheaper  than  payment  in  legal-tender 
notes,  was  too  captivating  not  to  be  received  with  great  favor  in  this  country, 
where  every  man  is  a  financier  and  thinks  that  the  way  to  pay  debts  is  by  fab- 
ricating currency." 


SILVER  LEGISLATION  IN   18V8.  191 

And  the  demand  for  the  free  coinage  of  a  dollar  containing 
only  ninety  cents  of  intrinsic  value  received  the  support  of 
all  who  had  before  marched  in  the  ranks  of  the  inflationists. 
Silver  had  got  into  politics,  and  was  henceforth  discussed 
politically,  not  scientifically. 

But  others,  forming  a  smaller  class,  supported  this  meas- 
ure in  the  belief  that,  even  if  silver  had  fallen  in  value,  it 
was  just  and  right  to  issue  a  coin  which  was  of  the  same 
weight  and  fineness  as  that  demonetized  in  1873,  and  to 
allow  debtors  to  pay  in  this  money.  These  were  persons 
who  probably  did  not  subscribe  to  the  tenets  of  the  paper- 
money  inflationists,  and  honestly  could  not  see  that  the  argu- 
ments against  cheaj)  paper  had  any  force  in  regard  to  an  issue 
of  coin,  even  if  it  had  fallen  in  value.  The  wrong  in  a 
ninety-cent  silver  dollar  was  not  apparent  to  men  who 
could  declare  that  they  were  in  favor  of  "hard  money." 
The  fact  that  greenbacks  were  worth  more  than  the  silver 
in  a  dollar,  and  were  steadier  in  value  than  it,  did  not  affect 
them.  If  payment  were  offered  in  coin,  that,  they  thought, 
was  enough.  This  fact  that,  although  a  cheap  and  depre- 
ciated dollar  was  offered  to  the  country,  it  had  been  very 
lately^  (1873)  an  unlimited  legal  tender,  and  that,  as  the  bill 
was  finally  passed,  the  dollars  could  not  be  issued  in  un- 
limited quantities,  made  it  very  difficult  for  men  who  did 
not  thoroughly  understand  the  functions  performed  by  a 
proper  medium  of  exchange  to  see  their  error,  or  to  be  con- 
vinced of  it.'^     They  believed  that,  if  it  had  been  right  to 

'  "By  it  [act  of  1873]  one  half  of  our  money-metal  is  virtually  abolished, 
silver  money  is  abrogated,  the  Government,  the  several  States,  territories,  cities, 
all  corporations,  and  the  people,  are  deprived  of  their  right  to  pay  their  debts  in 
silver  coin." — Senator  Merrimon,  "Globe,"  vol.  cxxxvi,  p.  977. 

'  "But  we  are  told  that  policy  forbids  restoring  silver  to  our  coinage  inde- 
pendent of  our  legal  right ;  that  the  quantity  of  metal  which  we  propose  to  coin 
into  a  dollar  is  worth  but  ninety  cents  in  gold,  and  a  depreciation  of  10  per 
cent  in  all  values  would  follow.  This  is  a  queer  argument  to  urge  in  the  face 
of  the  fact  that  worthless  paper,  bearing  the  impress  of  Government  authority, 
with  no  intrinsic  value  whatever,  by  being  invested  with  the  functions  of  money 
is  worth  nearly  its  face  value  in  gold." — Senator  Jones  (Nevada),  "Globe," 
vol.  cxxxvi,  p.  440. 


192  THE  UNITED   STATES,    1873-1885. 

pay  in  gold  when  it  fell  in  value  toward  the  year  1853,  it 
was  right  in  18Y8  to  pay  in  silver  when,  in  turn,  it  fell  in 
value.  In  all  this  class,  however,  it  will  be  seen  that  they 
were  influenced  by  the  question  of  the  ability  to  pay  debts 
and  existing  contracts;  and  that  they  overlooked  entirely 
the  original  justice  of  a  legal-tender  law — namely,  that  it 
should  secure  to  the  lender  at  the  end  of  his  contract  only 
the  same  purchasing  power  ^  which  he  parted  with  when 
the  contract  was  made.  Of  course,  this  section  of  the  sil- 
ver party  were  quite  willing  to  see  only  a  single  standard  of 
silver  in  the  country.  They  were,  therefore,  not  advocates 
of  a  double  standard,  but  of  a  single  standard  ^  established 
in  the  cheapest  metal,  as  may  be  seen  by  this  utterance : 
"Our  money  system  was  not  based  on  the  idea  that  we 
should  have  both  metals  always  and  concurrently  in  circula- 
tion, but  upon  the  idea  that  there  might  occur  occasional 
variations  in  their  value,  and  that  it  would  always  be  to  our 
advantage  in  every  respect  to  make  avail  of  the  cheaper  of 
the  two."  ^ 

This  wing  of  the  silver  party,  however,  urged  the  un- 
limited coinage  of  silver  dollars  of  412|-  grains,  but  were 

*  "  If  I  could  sink  low  enough  in  my  own  estimation  to  be  willing  to  take 
advantage  of  my  creditor,  and  insist  that  it  was  right  for  me  *o  pay  him  but  ten 
cents  for  the  dollar  which  I  honestly  owed  him  ;  much  more,  if,  in  a  legislative 
body,  in  making  the  law,  when  the  question  is  not  what  the  law  is  but  what  it 
ought  to  be,  I  should  claim  that  it  would  be  right  or  proper  for  me  to  aid  in  pass- 
ing such  a  law  to  enable  me  and  all  other  dishonest  debtors  to  justify  our  dis- 
honesty under  the  legal  power  conferred  by  such  an  act,  and  thus  to  encourage 
dishonesty,  I  should  feel  that  all  men  would  have  the  right  to  say  of  me  that, 
but  for  the  restraint  of  the  law,  I  could  be  a  knave  and  criminal." — Senator 
Christiancy,  "  Globe,"  vol.  cxxxvi,  p.  668. 

*  "But  it  is  urged  that  if  we  remonetize  silver,  it,  being  the  cheaper,  will 
drive  gold  out  of  the  country.  Suppose  it  does ;  if,  as  is  predicted  by  the 
enemies  of  the  bill,  silver  will  flood  the  country,  and  we  pay  all  our  debts  with 
silver,  both  public  and  private,  if  this  bill  should  become  a  law,  where  is  the 
injury  to  the  nation  or  the  citizens  thereof  ?  But  it  is  not  true  that  gold  would 
be  driven  out.  "Why  does  it  not  have  that  effect  in  France  ?  Why  did  it  not 
have  that  effect  from  the  foundation  of  the  Government  down  to  the  date  of  its 
demonetization  ?  " — Senator  Hereford,  "  Globe,"  vol.  cxxxvi,  p.  205. 

*  Senator  Jones,  of  Nevada,  "Globe,"  vol.  cxxxvii,  p.  1080. 


SILVER  LEGISLATION  IN   1878.  193 

not  in  favor  of  a  silver  dollar  containing  more  grains,  whicli 
would  bring  its  value  more  nearly  to  that  of  gold  or  paper. 
The  free  coinage  of  the  silver  dollar  would  have  given  to  each 
man  who  brought  silver  bullion  to  the  Mint  the  benefit  of  the 
whole  difference  between  the  intrinsic  value  of  412|^  grains 
of  silver  and  the  nominal  legal-tender  power  given  it  by  its 
face  value ;  and  this  difference  was  to  be  used  by  any  debtor 
to  deliver  himself  from  his  obligations  to  just  that  amount 
without  returning  to  his  creditor  any  purchasing  power  there- 
for. This  was  repudiation  of  debts  on  a  scale  to  the  dollar 
marked  by  the  descent  in  the  intrinsic  value  of  silver  below 
its  face  value.  Of  course,  there  was  no  question  as  to  the 
power  of  Congress  to  create  a  dollar  of  silver  worth  only 
ninety  cents  in  gold  ;  but,  inasmuch  as  Congress  was  the  law- 
making branch,  it  was  their  duty  to  consider  not  merely  what 
they  could  ^  do,  but  what  they  ought  to  do,  in  view  of  all  the 
demands  of  strict  justice  and  honor. 

Another  influential  section  which  was  actively  supporting 
the  bill  was  made  up  chiefly  of  Senators  (and  their  followers 
in  the  House)  whose  constituents  were  interested  in  silver 
mines.  These  men  urged  the  silver  bill  exactly  after  the  man- 
ner in  which  legislation  was  urged  in  protection  of  other  spe- 
cial industries.^    It  was  urged  that  the  Government  should  aid 

'  "  These  rights  depend  on  the  law ;  the  law  is  their  definition  and  measure ; 
and  whatever  dealings  with  them  on  our  part  are  lawful  must  be  right,  and  there- 
fore honorable." — Senator  Morgan,  "  Globe,"  vol.  cxxxvi,  p.  140. 

"  "  It  seems  to  me,  however,  that  these  gentlemen  overlook  the  fact  that  the 
object  in  remonetizing  the  silver  dollar  is  not  alone  to  furnish  money  for  the 
payment  of  the  public  debt.  The  main  purpose  is  to  arrest  the  movements 
inaugurated  in  Europe,  and  blindly  followed  in  this  country,  to  destroy  a  great 
part  of  the  wealth  of  mankind.  .  .  .  The  remonetization  of  silver  aims  at  the 
restoration  of  commerce,  manufactures,  agriculture,  and  all  our  industries  to 
their  former  prosperous  state." — Senator  Bailey,  "  Globe,"  vol.  cxxxvi,  p.  306. 
State  aid  was  also  appealed  to  by  Senator  Merrimon  (North  Carolina),  ibid., 
p.  978.  "  This  silver  mania  .  .  .  seems  to  me  to  be  a  very  peculiar  disease.  .  .  . 
Its  intensity  seems  to  be  manifested  very  nearly  in  proportion  to  the  proximity 
of  the  victims  to  the  great  bonanza  mines.  ...  It  seems  to  have  passed  to  the 
people,  attacking  with  most  severity  those  most  deeply  in  debt." — Senator 
Christiancy,  "  Globe,"  vol.  cxxxvi,  p.  667.     "  It  is  needed  to  utilize  our  vast 


194:  THE  UNITED  STATES,    1873-1886. 

tlie  owners  of  mines  in  keeping  np  the  value  of  silver.  "  I 
think,  too,  that,  as  silver  is  a  product  of  our  own  country  .  .  . 
it  is  proper  that  we  should  do  whatever  is  well  calculated 
to  encourage  its  production  and  increase  the  demand  for  it," 
said  Senator  Hill,  of  Georgia.  A  member^  of  the  House 
from  Kentucky  declared  :  "  Our  Western  States  and  Territo- 
ries are  rich  in  silver  ore.  Let  us  remonetize  silver  and  there- 
by increase  the  production  of  this  metal."  While  a  Western 
Congressman  ^  urged  :  "  I  am  also  in  favor  of  restoring  silver 
because  silver  is  a  product  of  this  country,  and  it  would  give 
it  increased  value  to  make  it  a  legal  tender.  .  .  .  Are  we  to 
allow  the  designing  legislation  of  1873  to  further  depreciate 
the  value  of  one  of  our  most  valuable  products  ?  .  .  .  Our 
mining  interests  have  been  very  much  embarrassed  for  the 
last  few  years  because  of  this  legislation." 

In  close  alliance  with  this  body  came  another  class,  who 
argued  that  silver  had  not  fallen  in  value,  but  that  gold  had 
risen  ^  in  value,  and  that  a  dollar  of  412|-  grains  was  a  just 
means  of  payment  for  all  indebtedness.  This  section  of  the 
silver  party  displayed  very  much  more  ability  than  the  ordi- 
nary advocate,  and  on  questions  of  statistics  showing  a  fall 
of  prices  since  18Y3  they  were  easily  able  to  surround  their 
position  with  plausible  facts  and  arguments.  Senator  Mat- 
thews *  took  the  following  position : 

silver  mines,  to  employ  our  mining  labor,  and  to  turn  the  silver  streams  into 
the  channels  of  trade.  It  is  needed  for  the  encouragement  of  our  languishing 
industries  and  the  employment  of  our  starving  laborers." — Bright,  "  Globe," 
vol.  cxxxvi,  p.  585. 

1  Durham,  "Globe,"  vol.  cxxx,  December  13,  ISYG. 

*  Landers  (Indiana),  ibid.,  p   165. 

^  Senator  Withers  held  that  contraction  had  led  to  the  panic  of  1873.  "Fol- 
lowing upon  this  was  the  additional  contraction  caused  by  the  act  of  1873  de- 
monetizing silver,  thus  reducing  at  once  by  about  one  half  the  capacity  of  the 
country  to  pay  the  bonds,  depreciating  largely  the  value  of  silver,  and,  as  a 
natural  consequence,  enhancing  the  value  of  gold — all  of  which  inured  directly 
to  the  interest  of  the  bondholder,  and  added  from  8  to  10  per  cent  to  the  value 
of  the  bonds."—"  Globe,"  vol.  cxxxvi,  pp.  849,  850.  Cf.  also  Willard  (Michi- 
gan), "  Globe,"  vol.  cxxx,  p.  165. 

*  December  10,  1877,  "Globe,"  vol.  cxxxvi,  p.  91. 


SILVER  LEGISLATION  IN   1878.  195 

"  Then,  I  answer,  and  it  can  be  demonstrated  by  an  impreg- 
nable array  of  facts,  that  silver  can  to-day  buy  more  of  every 
other  known  product  of  human  labor  than  it  could  in  July, 
1870,  gold  alone  excepted  ;  lands,  houses,  stocks  of  merchan- 
dise, machinery,  labor,  everything  but  gold  ;  here,  elsewhere. 
In  Asia,  in  Europe,  throughout  the  whole  Continent,  nowhere, 
measured  by  the  average  price  of  the  general  commodities  of 
the  world,  has  silver  depreciated  the  breadth  of  a  hair,  .  .  ." 

Mr.  Eaton  :  " .  .  .  That  it  can  buy  more  land  in  America 
to-day  than  it  could  in  1870  undoubtedly  is  true,  but  less 
abroad." 

Mr.  Matthews  :  "  What  have  we  got  to  do  with  '  abroad '  ? 
.  .  .  Who  does  not  know  that  there  is  and  has  been  through- 
out this  country,  throughout  Great  Britain,  throughout  Ger- 
many, throughout  France,  throughout  Austria,  throughout 
Italy,  throughout  the  civilized  world,  everywhere,  a  most  ex- 
traordinary depression  in  values  for  the  last  four  years  ?  And 
there  is  no  cause  that  prevails  as  generally  as  that  effect,  and 
adequate  to  account  for  it,  but  the  blindness  of  that  con- 
spiracy which  has  sought  to  exalt  gold  as  the  god  and  king  of 
money." 

The  most  zealous  advocate,  however,  of  the  theory  that 
gold  had  risen  in  value  was  Senator  Jones,  of  ]N^evada,  who 
quoted  tables  ^  of  prices  from  1872  to  1876  to  show  that  gen- 
eral prices  had  fallen  from  19  to  25  per  cent.  Then,  as  he 
found  that  silver  had  fallen  only  10  per  cent  relatively  to  gold, 
he  argued  that  silver  had  even  appreciated^  in  value,  instead 

'  "Globe,"  vol.  cxxxvii,  pp.  101'7-1026.  He  quoted  a  table  in  the  New- 
York  "  Public"  of  May  18,  1876. 

2  "  I  do  not  hesitate  to  affirm  that  an  examination  of  all  the  facts  bearing 
upon  the  case  .  .  .  will  demonstrate  that  gold  again  began  to  rise  about  ten 
years  ago,  and  especially  about  five  years  ago,  as  measured  by  commodities, 
land,  and  labor,  and  that  its  rise  is  still  unchecked ;  and  that  this  last  rise  of 
gold,  as  so  measured,  has  been  so  greatly  in  excess  of  its  rise  as  compared  with 
silver  as  to  show  that  silver  has  not  fallen  in  value ;  or,  in  other  words,  that  the 
average  fall  in  the  gold  price  of  commodities  has  been  so  much  greater  than 
the  fall  in  the  gold  price  of  silver  as  to  make  the  conclusion  irresistible  that 
silver,  instead  of  having  depreciated  in  value  during  the  last  few  years,  has 
actually  appreciated,  though  not  to  the  same  extent  as  gold." — "  Globe,"  vol. 
cxxxvii,  p.  1019.  The  inconsistency  of  this  position  with  that  of  most  advo- 
cates of  remonetization  was  distinctly  pointed  out  by  another  Senator :  "  But, 
notwithstanding  it  is  so  evident  and  so  generally  admitted  that  the  demonetiza- 
tion of  silver,  by  checking  a  demand  for  it,  reduced  its  price  and  increased  the 
demand  for,  and  the  price  of,  gold,  the  argument  is  now  started  that  the  whole 


X96  THE  UNITED   STATES,   1873-1885. 

of  having  fallen  in  value,  relatively  to  all  other  commodities. 
This  was  an  untenable  ground,  as  we  saw,  by  the  comparison 
of  prices  collected  from  the  London  "  Economist,"  in  our  last 
chapter,^  that  prices  were  as  high  in  1877  as  they  had  been  in 
1867.  But  we  do  know,  and  every  one  admits,  that  since  1873 
there  had  been  a  very  marked  fall  in  prices  until  1880.  The 
conclusion,  however,  that  this  was  due  to  the  contraction  of 
metallic  currency  caused  by  the  demonetization  of  silver,  is 
a  complete  non  sequitur.  It  overlooks  one  of  the  most  im- 
portant factors  in  regulating  prices ;  for  it  ignores  the  col- 
lapse of  credit  and  the  fall  of  prices  which  inevitably  follows 
in  the  wake  of  any  financial  crisis,  and  which  continues  until 
liquidation  of  debts  arising  from  the  speculative  basis  of  pre- 
ceding years  has  been  somewhat  completed.  A  fall  of  prices 
due  to  an  enfeebled  state  of  credit,  one  very  important  part  of 
purchasing  power,  can  take  place  without  any  change  what- 
ever in  the  quantity  of  the  metallic  medium  in  a  country.  It 
is,  therefore,  perfectly  true  that  after  the  panic  of  1873  prices 
slowly  fell  as  liquidation  went  on,  and  that  a  gold  dollar 
could  buy  more  in  1879  than  in  1872 ;  but  it  was  not  neces- 
sarily due  to  any  cause  which  affected  that  one  factor  in  the 
exchange,  gold,  but  to  changes  in  the  other  factors.  More- 
over, changes  which  reduced  the  cost  of  production  of  all 
kinds  of  goods  came  thick  and  fast,  and  lessened  the  price  of 
goods  exchanged  against  gold  without  changing  the  absolute 
position  of  gold.  That  this  altered  the  situation  unfavorably 
to  debtors  is  admitted ;  but  it  is  an  alteration  of  a  kind  which 
regularly  happens  after  every  unfortunate  business  revul- 
sion, such  as  occurred  in  1857  and  1866,  and  is  no  ground 
for  talking  about  a  cause  which  is  supposed  to  be  operating 
on  gold  (when  it  is  operating  on  the  things  for  which  gold 
is  exchanged). 

A  very  large  number  of  our  legislators  were,  no  doubt, 

effect  of  the  demonetization  of  silver  was  to  leave  silver  exactly  where  it  was, 
and  to  elevate  the  price  and  value  of  gold." — Senator  Christiancy,  "Globe/' 
vol.  cxxxvi,  p.  794. 
'  Page  163. 


SILVER  LEGISLATION  IN   1878.  I97 

honestly  impressed  with  the  belief  that  the  mere  gift  of  legal- 
tender  power  to  a  silver  dollar  worth  only  ninety  cents,  and 
its  remonetization,  would  so  increase  its  value  that  it  would 
very  soon  become  equal  to  the  gold  dollar.  This  was  a  con- 
stant and  favorite  argument.^  Said  Senator  Allison  :  "  Legis- 
lation gives  value  to  the  precious  metals,  and  the  commer- 
cial value  simply  records  the  condition  of  legislation  with 
reference  to  the  precious  metals."  It  was  even  urged  by 
Senator  Thurman  ^  that  the  remonetization  of  silver  by  the 
United  States  alone  would  stop  the  tendency  to  give  up 
silver  in  other  States,  and  would  raise  the  value  of  412^ 
grains  of  silver  to  the  level  of  the  gold  dollar.  Subsequent 
events  did  not  justify  this  sanguine  hope,  as  may  be  seen  by 
reference  to  Chart  XIV,  showing  the  fluctuations  and  fall  of 
silver  since  1878.  It  was  believed  by  many  that  the  action 
of  Germany  alone  had  caused  the  fall  of  silver ;  and,  ignorant 
of  the  fundamental  forces  which  had  shown  themselves  in  the 
single  case  of  Germany,  and  would  have  broken  out  elsewhere 
if  Germany  had  not  acted,  they  held  that  the  coinage  of  sil- 
ver by  the  United  States  would  exactly  fill  the  breach  made 
by  the  withdrawal  of  Germany.  An  inspection  of  Chart 
XIII  will  show  how  fundamental  a  change  was  going  on  in 
the  value  of  silver  since  1870  as  compared  with  the  whole 
course  of  its  history  since  1687.  It  was  hardly  likely  that  a 
single  event,  such  as  the  action  of  the  United  States,  could 
stop  so  marked  a  fall. 

Some  astounding  ignorance  of  monetary  principles  w^as, 
of  course,  exhibited.  "  It  is  said  that  if  we  authorize  the 
coining  of  silver  of  412|^  grains  to  the  dollar  the  effect  will 
be  to  drive  gold  from  the  country.     I  deny  ^  this  utterly." 

'  Senator  Wallace  said :  "  If  we  coin  annually  one  half  of  the  world's  supply 
of  silver,  its  rise  in  value  is  inevitable." — "  Globe,"  vol.  cxxxvi,  p.  641.  Simi- 
larly  Hill  (Georgia),  ibid.,  p.  850.  Allison  thought  that  the  United  States  with 
the  Latin  Union  might  restore  silver  to  its  former  value.  "  If  we  restore  silver, 
shall  we  not  practically  place  in  circulation  and  in  use  an  equivalent  of  the 
amount  of  silver  demonetized  by  the  action  of  the  German  Government  ?  " — 
"Globe,"  vol.  cxxxvi,  p.  175. 

»  "  Globe,"  vol.  cxxxvi,  pp.  ISG-ISS. 

'  Senator  Johnston  (Virginia),  "  Globe,"  vol.  cxxxvi,  p.  823. 


198  THE  UNITED  STATES,   1873-1885. 

The  operation  of  Gresliam's  law  was  not  even  admitted,  be- 
cause, forsooth,  silver  was  not  an  "  inferior  "  currency.^  A 
common  fallacy,  too,  was  that,  if  A  owned  silver  bullion  and 
had  it  coined  at  the  Mint,  where  free  coinage  was  allowed,  a 
debtor  B  who  owed  a  creditor  C  could  thereby  come  into 
possession  ^  of  A's  dollars  by  a  miracle,  and  have  as  many 
dollars  as  he  wanted.  A  wholesome  reply  to  this  was  given  ^ 
by  Senator  Bayard : 

"  It  can  not  be  that  the  laboring  class  are  the  debtor  class. 
On  the  contrary,  as  I  say,  there  is  not  a  day  in  the  year  when 
the  sun  goes  down  when  they  are  not  the  creditors  of  capital 
for  the  amount  of  their  wages  for  that  time.  ...  So  I  say, 
considering  the  great  fact  that  each  man  in  the  community 
sustains  the  relation  of  creditor  as  well  as  debtor,  that  if  he 
can  pay  his  debts  in  this  depreciated  money  he  will  be  paid 
himself  in  the  same  money,  nothing  can  be  made  of  it  that  I 
can  understand,  excepting  that  a  class  of  people  who,  having 
purchased  property  at  exaggerated  prices  and  finding  it  now 

'  "  It  is  said  that  an  inferior  currency  always  drives  away  the  superior,  which 
is  true  in  a  measure  ;  but,  in  my  opinion,  the  argument  will  not  hold  good  in  this 
instance,  because,  first,  as  a  currency  of  general  use  in  the  current  transactions 
of  trade  and  barter  among  the  masses,  silver  is  not  now,  and  never  has  been,  in- 
ferior to  gold ;  second,  supposing  it  to  be  the  cheaper  of  the  two,  it  can  not 
drive  out  the  superior  until  it  becomes  equal  in  volume  to  it,  sufficient  in  quan- 
tity to  fill  up  the  channels  of  trade,  which  is  not  likely  to  occur." — Finley, 
•'Globe,"  vol.  csxxvii,  p.  1264. 

*  This  is  one  example  of  many  :  "  Enact  this  law  and  confidence  will  be  re- 
stored in  the  public  mind.  .  .  .  The  people  of  this  country,  and  especially  the 
people  of  the  West,  have  an  abiding  confidence  that  the  enactment  of  a  law  of 
this  kind  will  give  them  not  only  immediate  but  permanent  relief.  .  .  .  They 
understand  that  every  dollar  of  silver  that  is  coined  in  this  land  adds  one  dollar 
to  the  material  wealth  of  the  people  [!]." — Tipton  (Illinois),  "  Globe,"  vol. 
cxxxvi,  p.  601.  See,  also.  Senator  Jones,  vol.  cxxxvii,  p.  1024.  As  amusing  as 
any  of  the  bits  of  rhetoric  was  that  by  which  Senator  Allison,  without  consider- 
ing where  the  value  was  to  come  from  to  be  exchanged  for  the  coin,  argued  that 
very  large  sums  of  silver  might  be  coined  because  the  negroes  of  the  South 
would  take  such  very  large  quantities.  "  Who  does  not  believe  that  if  it  is 
made  a  legal  tender,  or  rather  if  silver  dollars  are  coined,  these  colored  people, 
like  the  people  of  China  and  the  East  Indies,  will  hoard  this  money  in  consider- 
able sums,  so  that  we  shall  be  able  to  go  on  coining  at  the  rate  of  $30,000,000 
per  annum  for  many  years  to  come  without  disturbing  the  relative  value  between 
gold  and  silver?" — "Globe,"  vol.  cxxxvi,  p.  175. 

3  "  Globe,"  vol.  cxxxvi,  p.  734. 


SILVER  LEGISLATION  IN    1818.  199 

shrinking  in  value,  may  have  an  opportunity  of  scaling  their 
debts  to  the  injury,  the  injustice,  of  their  creditors." 

There  were,  however,  men  who  used  this  discussion  sim- 
ply as  a  means  to  an  end,  in  catching  the  vulgar  ear  by  bun- 
combe, and  went  to  such  an  extent  as  to  merit  quotation  as 
giving  specimens  of  the  humor  in  the  situation.  Said  one :  ^ 
"  Why,  Senators,  we  had  acquired  Louisiana  and  Florida,  we 
had  carried  on  a  war  with  Great  Britain  from  1812  to  1815, 
when  we  had  hardly  any  gold  coin,  on  the  credit  of  the  silver 
dollar.^''  Nothing,  perhaps,  can  be  better  than  the  following  ^ 
eulogium  of  a  Southern  Senator  on  silver :  "  It  enjoys  this 
natural  supremacy  among  the  largest  number  of  people  be- 
cause the  laboring  people  prefer  it.  They  use  it  freely  and 
confidingly.  It  is  their  familiar  friend,  their  boon  compan- 
ion, w^hile  gold  is  a  guest  to  be  treated  with  severest  consid- 
eration ;  to  be  hid  in  a  place  of  security ;  not  to  be  expended 
in  the  markets  and  fairs.  It  is  a  treasure,  and  not  a  tool  of 
trade,  wdth  the  laboring  people.  A  twenty-dollar  gold  piece 
is  the  nucleus  of  a  fortune,  to  remain  hid  until  some  freak  of 
fortune  shall  add  other  prisoners  to  its  cell.  But  twenty  dol- 
lars in  silver  dimes  is  the  joy  of  the  household,  'the  substance 
of  things  hoped  for,  the  evidence  of  things  not  seen.'  .  .  . 
Silver  is  to  the  great  arteries  of  commerce  w4iat  the  mountain- 
springs  are  to  the  rivers.  It  is  the  stimulant  of  industry  and 
production  in  the  thousands  of  little  fields  of  enterprise  which 
in  the  aggregate  make  up  the  wealth  of  the  nation."  If  any- 
thing could  equal  this,  it  was  the  utterance  ^  of  a  well-known 
^Northern  Senator,  Mr.  Blaine : 

'  Beck,  "  Globe,"  vol.  cxxxvi,  p.  25*7. 

*  Morgan  (Alabama),  "  Globe,"  vol.  cxxxvi,  p.  143. 

3  "  Globe,"  vol.  cxxxvi,  p.  822.  Mr.  Blaine  believed  that  the  double  stand- 
ard was  established  by  the  Constitution  !  "  No  power  was  conferred  on  Con- 
gress to  declare  that  either  metal  should  not  be  money.  Congress  has,  there- 
fore, in  my  judgment,  no  power  to  demonetize  silver  any  more  than  to  demone- 
tize gold ;  no  power  to  demonetize  either  any  more  than  to  demonetize  both.  .  .  . 
If,  therefore,  silver  has  been  demonetized,  I  am  in  favor  of  remonetizing  it." 
But  he  urged  a  dollar  of  425  grains  standard  silver,  instead  of  412^  grains,  worth 
in  1878  only  93  cents  in  gold.  "I  think  now  very  clearly,  with  the  light  before 
me,  that  it  [the  act  of  18Y3]  was  agreat  blunder," — " Globe,"  vol.  cxxxvii,  p.  1063. 


200  THE  UNITED   STATES,   1873-1885. 

"  Ever  since  we  demonetized  the  old  dollar  we  have  been 
running  our  Mints  at  full  speed,  coining  a  new  silver  dollar 
[trade  dollar]  for  the  use  of  the  Chinese  cooly  and  the  Indian 
pariah — a  dollar  containing  420  grains  of  standard  silver,  with 
its  superiority  over  our  ancient  dollar  ostentatiously  engraved 
on  its  reverse  side.  .  .  .  And  shall  we  do  less  for  the  Ameri- 
can laborer  at  home  ?  ...  It  will  read  strangely  in  history 
that  the  weightier  and  more  valuable  of  these  dollars  is  made 
for  an  ignorant  class  of  heathen  laborers  in  China  and  India, 
and  that  the  lighter  and  less  valuable  is  made  for  the  intelli- 
gent and  educated  laboring-man  who  is  a  citizen  of  the  United 
States." 

The  aristocratic  character  of  the  yellow  metal  is  thus^  well 
defined  :  "  Gold  is  the  money  of  monarcbs ;  kings  covet  it ; 
the  exchanges  of  nations  are  effected  by  it.  Its  tendency  is 
to  accumulate  in  vast  masses  in  the  commercial  centers,  and 
to  move  from  kingdom  to  kingdom  in  such  volumes  as  to  un- 
settle values  and  disturb  the  finances  of  the  world."  The 
following^  unctuous  fondness  for  silver  was  put  forth  by 
Senator  Howe,  afterward  a  delegate  to  the  Monetary  Con- 
ference of  1878:  "But  we  are  told  the  cheaper  metal  will 
drive  out  the  dearer,  and  gold  will  be  banished  from  our  cir- 
culation. Silver  will  not  drive  out  anything.  Silver  is  not 
aggressive  ;  it  is  so  much  like  the  apostle's  description  of  wis- 
dom that  it  is  '  first  pure,  then  peaceable,  gentle.'  .  .  .  Put  a 
silver  and  a  gold  dollar  into  the  same  purse  and  they  will  lie 
quietly  together." 

In  fine  contrast  with  this  spirit  was  the  mauly  and  honest 
attitude  taken  by  Senator  Lamar  ^  when  his  State  Legislature 
in  Mississippi  instructed  him  by  resolutions  "  to  vote  for  the 
acts  remonetizing  silver  and  repealing  the  Resumption  Act," 
and  to  use  his  "  efforts  to  secure  their  passage."  He  offered 
to  withdraw  from  public  life  rather  than  vote  for  measures 
which  he  deemed  to  be  injurious  to  the  country : 

"Mr.  President,  between  these  resolutions  and  my  convic- 
tions there  is  a  great  gulf.  I  can  not  pass  it.  ...  I  have  al- 
ways endeavored  to  impress  the  belief  that  truth  was  better 

'  Senator  Ingalls,  "Globe,"  vol.  cxxxvii,  p.  1052. 

»  "Globe,"  vol.  cxxxvi,  p.  765.  »  "Globe,"  vol.  cxxxvii,  p.  1061. 


SILVER  LEGISLATION  IN   1878.  201 

than  falsehood,  honesty  better  than  policy,  courage  better  than 
cowiirdice.  To-day  my  lessons  confront  me.  To-day  I  must 
be  true  or  false,  honest  or  cunning,  faithful  or  unfaithful  to  ray 
people.  Even  in  this  hour  of  their  legislative  displeasure  and 
disapprobation  I  can  not  vote  as  these  resolutions  direct.  I 
can  not  and  will  not  shirk  the  responsibility  which  my  position 
imposes.  My  duty,  as  I  see  it,  I  will  do,  and  I  will  vote 
against  this  bill.  .  .  .  Then  it  will  be  for  them  to  determine 
if  adherence  to  my  honest  convictions  has  disqualified  me  from 
representing  them." 

§  6.  During  the  passage  of  the  Bland- Allison  bill  through 
Congress,  Senator  Matthews  (Ohio)  introduced  a  concurrent 
resolution  on  which  as  much  debate  was  spent  as  on  the 
Bland  bill  itself.  This  resolution^  aimed  to  establish  the 
technical  right  of  the  United  States  to  pay  the  principal  and 
interest  of  its  public  debt  in  silver  dollars  of  412^  grains  : 

"  Whereas^  By  the  act  entitled  '  An  act  to  strengthen  the 
public  credit,'  approved  March  18, 1869,  it  was  provided  and 
declared  that  the  faith  of  the  United  States  was  thereby 
solemnly  pledged  to  the  payment  in  coin  or  its  equivalent  of 
all  the  interest-bearing  obligations  of  the  United  States,  ex- 
cept in  cases  where  the  law  authorizing  the  issue  of  such  ob- 
ligations had  expressly  provided  that  the  same  might  be  paid 
in  lawful  money  or  other  currency  than  gold  or  silver ;  and 

"  Whereas^  All  the  bonds  of  the  United  States  authorized 
to  be  issued  by  the  act  entitled  '  An  act  to  authorize  the  re- 
funding of  the  national  debt,'  approved  July  14,  1870,  bj 
the  terms  of  said  act  were  declared  to  be  redeemable  in  coin 
of 'the  then  present  standard  value,  bearing  interest  payable 
semi-annually  in  such  coin  ;  and 

"  ^Y^lereas^  All  bonds  of  the  United  States  authorized  to 
be  issued  under  the  act  entitled  '  An  act  to  provide  for  the 
resumption  of  specie  payments,'  approved  January  14,  1875, 
are  required  to  be  of  the  description  of  bonds  of  the  United 

'  Introduced  December  6,  ISTT  ("  Globe,"  vol.  cxxxvi,  p.  47).  Passed  the 
Senate  January  25,  1878,  by  a  vote  of  43  to  22.  Passed  House,  without  debate, 
January  28th,  by  a  vote  of  189  to  79.  It  was  not  a  party  question.  It  was 
supported  by  116  Democrats  and  73  Republicans,  and  opposed  by  23  Democrats 
and  56  Republicans. 


202  THE  UNITED  STATES,   1873-1885. 

States  described  in  the  said  act  of  Congress  approved  July 
14,  18Y0,  entitled  'An  act  to  authorize  the  refunding  of  the 
national  debt ' ;  and 

"  Whereas,  At  the  date  of  the  passage  of  said  act  of  Con- 
gress last  aforesaid,  to  wit,  the  lith  day  of  July,  1870,  the 
coin  of  the  United  States  of  standard  value  of  that  date  in- 
cluded silver  dollars  of  the  weight  of  412^  grains  each,  de- 
clared by  the  act  approved  January  18,  1837,  entitled  'An 
act  supplementary  to  the  act  entitled  "  An  act  establishing  a 
Mint  and  regulating  the  coins  of  the  United  States," '  to  be 
a  legal  tender  of  payment  according  to  their  nominal  value 
for  any  sums  whatever :  Therefore, 

"^e  it  resolved  by  the  Senate  {the  House  of  Representatives 
concurring  therein),  That  all  the  bonds  of  the  United  States 
issued,  or  authorized  to  be  issued,  under  the  said  acts  of  Con- 
gress hereinbefore  recited,  are  payable,  principal  and  inter- 
est, at  the  option  of  the  Government  of  the  United  States,  in 
silver  dollars  of  the  coinage  of  the  United  States  containing 
412|^  grains  each  of  standard  silver ;  and  that  to  restore  to 
its  coinage  such  silver  coins  as  a  legal  tender  in  payment  of 
said  bonds,  principal  and  interest,  is  not  in  violation  of  the 
public  faith,  nor  in  derogation  of  the  rights  of  the  public 
creditor." 

The  question  of  moral  and  legal  right  was  fully  argued  ^ 
by  the  Senate.  There  seems  to  be  no  doubt  as  to  the  tech- 
nical right  of  the  United  States  to  pay  interest  and  principal 
of  all  the  public  debt  in  silver,  if  the  Government  so  chooses. 
But,  on  the  other  hand,  it  is  equally  beyond  question  that 
resumption  of  specie  payments  would  have  been  rendered 
impossible  on  January  1,  1879,  had  it  been  understood 
from  1876  to  1878  that  "coin"  meant  silver  and  not  gold  ; 
because  only  on  the  explicit  explanation  of  the  Secretary 
of  the  Treasury  (John  Sherman)  that  the  word  "  coin " 
would  be  interpreted  as  gold  was  he  able  to  sell  the  bonds 

'  A  speech  by  Senator  Cockrell  ("  Globe,"  vol.  cxxxvi,  pp.  480-491)  is  a  fair 
example  of  the  arguments  for  the  technical  right  to  pay  in  silver.  See,  also, 
Matthews's  speech,  ibid.,  pp.  87-91. 


SILVER  LEGISLATION  IN   1878.  203 

needed  to  secure  a  gold  reserve  for  resumption  purposes. 
The  passage  of  the  Matthews  resolution,  in  fact,  was  recog- 
nized as  part  of  a  plan  to  scale  debts,  public  and  private,  by 
giving  free  coinage  to  silver;  and,  as  a  consequence,  our 
bonds  began  to  come  back  from  Europe  in  large  quantities. 
In  one  week  there  came  an  amount  of  ten  millions,  and  in 
1878  it  was  said  by  Mr.  Allison  that  one  hundred  millions 
had  been  returned.  This  action  shows  distinctly  enough 
whether  there  had  been  any  tacit  understanding  in  the  minds 
of  purchasers  of  bonds  that  they  expected  to  be  paid  in 
gold. 

When  the  silver  bill  was  vetoed '  by  President  Hayes,  he 
urged  as  his  reasons  for  not  giving  his  assent  to  it  that  (1) 
the  proposed  dollar  was  8  or  10  per  cent  less  in  value  than  it 
professed  to  be  ;  that  (2)  it  made  the  dollar  a  legal  tender  for 
debts  contracted  when  the  law  did  not  recognize  such  coins 
as  lawful  money ;  that,  (3)  by  making  the  dollar  receivable 
for  duties,  the  gold  revenue  of  the  United  States  would  be 
cut  off,  and  so  necessitate  the  payment  of  principal  and  in- 
terest of  the  national  debt  in  silver ;  that  (4)  of  the  bonded 
debt  then  outstanding  $1,143,493,400  was  issued  prior  to 
February,  1873,  when  no  silver  was  in  use,  and  $583,440,350 
had  been  refunded  since  that  time,  when  gold  was  the  only 
coin  for  which  the  bonds  were  sold  (gold  being  the  legal  unit 
since  1873),  and  so  understood  by  the  parties  to  the  contract ; 
that,  (5)  owing  to  the  fall  in  the  value  of  silver,  the  Adminis- 
tration would  have  been  unable  to  sell  the  $250,000,000  of 
bonds  at  4  per  cent,  placed  on  the  market  since  1876,  had 
they  not  quieted  the  doubts  of  the  purchasers  by  a  public 
statement  of  an  intention  to  pay  the  bonds  in  gold  and  not 
in  silver ;  that  (6)  to  pay  the  bonds  in  a  coin  less  than  that 
received  would  be  a  grave  breach  of  public  faith ;  and  that, 
(7)  in  case  the  silver  dollar  should  not  rise  to  par  with  gold, 
the  act  afforded  no  provision  for  exempting  pre-existing 
debts  from  this  law.     But  these  considerations  did  not  pre- 

'  For  the  text  of  the  message,  see  "Globe,"  vol.  cxxxvii,  p.  1410. 


204  THE  UNITED   STATES,    1873-1885. 

vail  with  a  sufficient  number  to  prevent  the  bill  from  being 
passed  over  the  head  of  the  Executive. 

At  the  time  when  Congress  was  discussing  the  silver  bill 
a  commission  ^  was  sitting,  appointed  to  investigate  the  causes 
of  the  change  in  the  relative  value  of  gold  and  silver,  the 
effects  upon  trade,  and  to  report  on  the  policy  of  restoring 
the  double  standard  in  the  United  States.  Three  Senators, 
Jones  (ISTevada),  Bogy,  and  Boutwell ;  three  Kepresentatives, 
Gibson,  Willard,  and  Bland,  and  two  "  experts,"  Mr,  Groes- 
beck  and  Professor  Bowen,  formed  the  commission.  It  was 
packed  in  favor  of  a  report  for  the  remonetization  of  silver, 
and  its  conclusions  have  never  had  much  weight.  The  mi- 
nority report  of  Prof.  Bowen  and  Mr.  Gibson  is,  however, 
excellently  done.  Messrs.  Jones,  Bogy,  Williard,  Bland,  and 
Groesbeck  signed  the  majority  report,  submitting  the  fol- 
lowing as  some  of  their  conclusions : 

{a)  The  demonetization  of  silver  by  Germany,  the  United 
States,  and  Scandinavia  has  been  the  chief  cause  of  the  fall 
in  silver  since  1870. 

(5)  The  commercial  depression  since  1873  was  due  to  the 
demonetization  of  silver,  and  will  become  chronic  if  gold 
remains  as  the  only  resource  for  money. 

(c)  Specie  resumption  by  the  United  States  is  not  possible 
until  silver  is  remonetized. 

{d)  Remonetization  of  silver  by  the  United  States  will 
deter  France  from  wholly  giving  up  silver. 

{e)  Remonetization  of  silver  by  the  United  States  will 
introduce  a  period  of  prosperity,  greater  in  proportion  as 
foreigners  pour  into  this  country  silver  in  exchange  for 
wheat,  cotton,  gold,  petroleum,  etc.  Even  if  the  rest  of  the 
world  gives  up  silver,  the  United  States  will  have  "  an  ad- 
vantageous exchange  of  commodities,  which  we  can  spare, 
for  money,  which  we  need." 

*  Authorized  August  15,  1876.     Report  ordered  printed  March  2,  1877,  as 
"  Senate  Report  No.  703,"  2d  session,  44th  Congress. 


CHAPTEK  XIY. 

THE   PRESENT    SITUATION. 

§  1.  The  operation  of  tlie  act  of  1S78  has  been  compli- 
cated to  many  minds  by  the  absence  of  the  free  coinage 
provision,  and  by  the  fact  that  only  the  Government  of  the 
United  States  can  purchase  bullion  and  have  it  coined  into 
dollars  of  412|  grains  (at  the  rate  of  not  less  than  $2,000,000, 
nor  more  than  $4,000,000  a  month).  It  was  not  apparent  why 
this  dollar,  which  in  18T8  contained  but  ninety  cents'  worth  of 
pure  silver,  could,  when  issued,  circulate  at  par  with  a  gold 
dollar ;  nor  is  it  understood  why  the  silver  dollar  is  to-day 
at  par  with  United  States  notes  redeemable  in  gold.  There 
are  several  reasons  to  account  for  this. 

By  the  issue  of  a  dollar  piece  containing  an  amount  of  sil- 
ver less  than  its  face  value,  such  a  coin  is  made  similar  in  its 
character  and  qualities  to  an  overvalued  subsidiary  currency, 
and  much  that  is  true  of  one  is  true  of  the  other  ;  except 
that,  in  this  case,  the  Bland  dollar  is  an  unlimited  legal  ten- 
der, while  subsidiary  coins  are  a  legal  tender  only  to  an 
amount  of  $10.     This  matter  was  mentioned  ^  in  the  debates 

1  "  I  am  willing  to  compromise  ...  on  this  subject,  and  make  silver  more 
thau  a  subsidiary  coin,  but  I  would  limit  its  legal-tender  power.  Why  ?  For 
the  very  reason  of  the  example  you  have  before  you.  The  Senator  from  Mis- 
souri has  thrown  it  in  our  faces  that  two  of  the  present  half-dollars  are  of  less 
weight  than  412^  grains,  and  yet  they  pass  at  par.  "Why?  Is  it  because  the 
value  of  the  silver  in  them  is  equal  to  25-8  grains  of  gold?  No,  sir;  but  be- 
cause of  the  limit  in  legal-tender  power,  and  because  there  is  no  other  currency 
with  which  it  comes  in  competition.  For  the  very  same  reason  your  minor 
coins  pass  at  par." — Senator  Hill,  "  Globe,"  vol.  cxxxvi,  p.  846. 
15 


206  THE  UIs'ITED  STATES,    1873-1885. 

of  Congress.  It  is  well  known  tliat  100  cents  of  our  sub- 
sidiary coin  contain  only  345-6  grains  of  pure  silver,  while 
the  Bland  dollar  contains  371*25  grains  ;  and  yet  we  con- 
stantly receive  for  "  change  "  two  half-dollars,  or  four  quar- 
ters, in  exchange  for  gold,  or  for  paper  redeemable  in  gold, 
on  equal  terms.  The  reasons,  therefore,  which  give  currency 
to  the  subsidiary  coins  will  account  for  the  currency  of  the 
dollars  of  412^  grains.  In  the  first  place,  they  are  limited  in 
quantity,  as  compared  with  the  uses  to  which  they  can  be 
put.  Silver  dollars,  moreover,  can  enter  into  our  common  cir- 
culation only  as  they  are  sent  forth  from  the  United  States 
Treasury  in  payment  of  its  dues.  At  no  time  since  the  act 
was  passed,  although  more  than  $200,000,000  have  been 
coined,  have  there  been  more  than  $42,000,000  of  the  Bland 
dollars  in  the  hands  of  the  public  and  in  circulation.  (See 
Chart  XYI.)  And  as  they  serve  as  "  change  "  in  a  scarcity 
of  one-  and  two-dollar  United  States  notes  (no  National  Bank 
notes  being  issued  of  denominations  less  than  five  dollars), 
there  is  an  evident  use  for  them,  just  as  there  is  a  use  for 
smaller  silver  pieces  (which  are  overvalued) ;  and,  if  the  Bland 
dollars  had  been  issued  on  the  principle  that  they  were  to  sup- 
ply the  place  of  small  bills,  a  very  considerable  quantity  could 
have  been  permanently  retained  in  the  circulation  at  par. 

Another  fact  which  maintains  the  silver  dollar  at  par 
with  gold,  and  which  is  of  considerable  importance,  arises 
from  the  provision  of  the  act  which  authorizes  the  issue  of 
silver  certificates.  Any  person  having  not  less  than  ten  of 
the  Bland  dollars  may  deposit  them  with  any  assistant  treas- 
urer and  receive  therefor  a  certificate  which,  in  size  and 
appearance,  closely  resembles  a  United  States  note.  The  im- 
portant consideration,  however  (and,  to  my  mind,  one  of  the 
most  important  provisions  of  the  act),  is  that  these  certifi- 
cates, in  the  words  of  the  statute,  "  shall  be  receivable  for 
customs,  taxes,  and  all  pub]''»,  dues."  This  is  a  species  of 
daily  redemption  of  the  silver  dollar ;  for  as  gold  has  hith- 
erto been  required  (as  it  was  during  and  since  the  war)  in 
payment  of  customs,  now  that  silver  dollars  are  receivable 


THE  PKESEXT  SITUATION.  207 

equally  with  gold  for  tliat  purpose,  they  must  remain  at  par 
with  gold  until  there  is  forced  upon  the  circulation  more 
than  is  necessary  for  such  uses.  If  silver  dollars  alone  had 
been  made  receivable  for  customs  and  taxes,  their  weight 
and  inconvenience  in  large  payments  would  have  restricted 
their  use  ;  but  the  silver  certificates  remove  all  objections 
based  merely  on  their  weight.  So  long,  therefore,  as  the 
silver  dollars  which  get  out  of  the  United  States  Treasury 
are  in  quantity  sufiicient  to  satisfy  only  the  needs  caused  by 
the  absence  of  small  notes,  and  the  sums  demanded  to  pay 
customs  and  taxes,  there  is  no  reason  why  they  should  depre- 
ciate in  value  any  more  than  the  silver  subsidiary  coins 
should  depreciate. 

Moreover,  so  long  as  the  Government  does  not  forcibly 
pay  out  silver,  but  leaves  the  acceptance  of  silver  to  the 
option  of  the  Government  creditor,  no  one  will  receive  it,  or 
give  full  gold  value  for  silver,  unless  he  thinks  he  can  dispose 
of  the  silver  also  for  its  full  face  value.  This,  in  itself,  must 
operate  to  limit  the  quantity  of  silver  dollars  which  could 
get  into  circulation.  If  too  many  pass  out  to  satisfy  the 
needs  I  have  mentioned,  they  will  begin  to  accumulate  in 
the  hands  of  merchants,  then  collect  by  deposit  in  the  banks, 
and,  if  the  United  States  will  not  withdraw  or  redeem  them, 
then  they  must  begin  to  depreciate,  just  as  the  smaller  silver 
coins  have  depreciated  in  the  past  when  issued  in  unneces- 
sary quantities.  No  legal-tender  power  conferred  on  them 
by  law  can  save  them  from  this  fate. 

As  may  be  seen  by  the  figures  and  lines  in  Chart  XVI, 
the  number  of  dollar  pieces  out  of  the  Treasury,  but  not 
covered  by  certificates,  has  remained  about  $40,000,000 ;  the 
quantity  of  certificates  outstanding,  also,  does  not  seem  to  be 
able  to  pass  a  limit  of  about  $114,000,000 ;  and  so  the  steady 
and  continued  coinage  of  silver  under  the  requirements  of 
the  law,  after  a  certain  point  has  been  passed,  has  for  its 
chief  effect  to  disturb  the  condition  of  the  Treasury.  The 
decrease  in  the  amount  of  outstanding  certificates  is  followed 
by  an  increase  of  silver  certificates  owned  by  the  Treasury ; 


208  THE  UNITED  STATES,   1873-1885. 

SO  that  the  silver,  either  in  the  form  of  dollars  or  certificates, 
accumulates  in  the  hands  of  the  Government,  because  the 
limit  of  the  capacity  of  the  public  to  absorb  both  dollars  and 
certificates  seems  to  have  been  reached. 

§  2.  It  has  been  a  mystery  to  many  people  that  the  silver 
dollar  of  412^  grains  should  continue  in  circulation  at  par, 
while  the  trade  dollar  of  420  grains  has  fallen  to  its  intrinsic 
value,  and  does  not  circulate  on  equal  terms  with  the  Bland 
dollar,  which  contains  less  silver.  The  co-existence  of  these 
two  silver  dollars  has  added  to  the  complexity  connected 
with  the  silver  question,  and  it  will  be  my  plan  to  finish  the 
story  of  the  trade  dollar,  begun  in  a  previous  chapter,^  in 
order  better  to  understand  this  subject. 

It  will  be  remembered  that  the  coinage  of  the  trade  dol- 
lar was  authorized  by  the  act  of  1873.  As  the  bill  came  from 
the  Treasury  officials,  in  1871,  it  contained  a  provision  for  a 
dollar  of  384  grains — that  is,  one  of  the  weight  of  100  cents 
of  subsidiary  coin.  This  was  in  the  bill  when  it  first  passed 
the  Senate,  and  also  when,  in  1872,  it  passed  the  House. 
January  7,  1873,  however,  Mr.  Sherman  reported  the  bill  in 
the  Senate  so  amended  .as  to  strike  out  the  clause  authorizing 
a  dollar  of  the  standard  of  the  subsidiary  coin,  and  inserted  in 
its  place  the  provisions^  for  the  coinage  of  the  trade  dollar, 
which  was  intended  purely  for  merchants  trading  with  the 
East.    This  amendment  was  promptly  accepted  by  the  House. 

At  the  time  the  act  was  passed  a  silver  dollar  containing 
420  grains  of  standard  silver  (378  grains  of  pure  silver)  was 
worth  104  cents  in  gold  ;  but  the  fall  in  the  value  of  silver 
after  1874  seriously  affected  the  uses  originally  intended 
for  the  trade  dollar.  The  fall  of  silver  relatively  to  gold  in 
1876  was  so  great  that  the  pure  silver  in  a  trade  dollar  be- 
came worth  less  than  a  gold  dollar ;  consequently  money- 
dealers  in  California,  where  gold  was  the  only  money  in  use, 
found  a  profit  in  putting  the  trade  dollars  into  circulation 
there.     At  this  time,  it  will  be  recalled,  this  coin  was  a  legal 

'  Chapter  vil,  §  4.  »  See  the  act  in  Appendix  III,  A,  VI. 


THE  PRESENT  SITUATION.  209 

tender  for  sums  of  five  dollars,  owing  to  an  unintentional 
provision  of  the  act  of  1873.  Although  this  law  limited  its 
use  to  small  payments,  the  mere  fact  of  its  circulation  in  the 
United  States  called  attention  to  the  inadvertence  in  the  act 
of  1873,  and  all  legal- tender  power  was  taken  away  from  the 
trade  dollar  by  a  section^  of  the  act  of  July  22,  1876,  and 
the  Secretary  of  the  Treasury  was  empowered  to  suspend  its 
coinage  altogether  at  his  discretion. 

As  yet,  however,  the  trade  dollar  had  not  come  into  use  in 
States  where  gold  was  not  in  circulation,  because  the  United 
States  notes  which  occupied  the  place  of  gold  were  worth 
less  than  the  silver  coin.  By  1877,  however,  the  United 
States  notes  had  so  increased  in  value  that  they  were  worth 
95  cents  in  gold  to  the  dollar ;  but  the  average  price  of  silver 
in  1877  was  only  5-±|(^.,  so  that  the  420  grains  of  standard 
weight  in  the  trade  dollar  were  worth  only  about  93  cents. 
As  a  consequence,  under  the  quick  action  of  money-brokers, 
trade  dollars  suddenly  appeared  in  circulation  in  the  United 
States  in  large  quantities.  It  was  found  more  profitable 
to  put  the  coin  into  circulation  at  home  than  to  export  it. 
After  1876  the  trade  dollars  had  no  legal-tender  quality  what- 
ever, and,  inasmuch  as  dishonest  persons  were  carrying  them 
to  remote  districts,  where  the  actual  nature  of  the  coins  was 
unknown,  and  were  passing  them  at  full  value,  the  Secretary 
promptly  used  the  discretion  granted  him  by  the  law,  and 
ordered  a  discontinuance  of  further  coinage  of  these  com- 
mercial dollars.  In  all,  there  were  coined  35,959,360  of 
these  pieces,  and  numbers  of  them  still  remain  in  the  hands 
of  money-dealers  or  individuals.  They  are,  however,  worth 
no  more  than  a  similar  amount  of  bullion.  The  Govern- 
ment does  not  redeem  them,  because  the  Government  only 
coined  them  at  the  expense,  and  for  the  convenience,  of 
owners  of  bullion,  for  commercial  purposes,  and  did  not 
create  them  as  legal  coins.  They  are  coins  only  in  shape 
and  appearance ;  in  truth,  they  are  only  round  disks  of  sil- 
ver bullion,  refined,  of  course,  with  the  stamp  of  tlie  United 

1  See  Appendix  III,  A,  X,  §  2. 


210  THE   UNITED   STATES,    ISYS-ISSS. 

States  on  them,  certifying  to  their  weight  and  fineness.  It 
has  been  proposed  in  Congress  to  redeem  them  at  their  face 
value  in  gold  ;  but  that  will  only  offer  to  foreigners  a  pre- 
mium on  these  dollars,  and  cause  all  that  have  gone  abroad 
to  come  back  again  for  redemption,  at  a  loss  to  the  Treasury 
equivalent  to  the  overvaluation  of  the  face  value  as  com- 
pared with  the  value  of  the  pure  silver  contained  in  them. 
Persons  by  whom  these  dollars  have  been  received  can  not 
see  why  a  trade  dollar,  which  contains  six  and  three  quarters 
more  grains  of  pure  silver  than  a  Bland  dollar,  is  not  equally 
good.  But  it  will  be  found  that  the  former  is  affected  by 
none  of  the  reasons  which  were  assigned  as  giving  support 
to  the  value  of  the  latter.  Having  no  legal-tender  power 
whatever,  the  former  are  not  receivable  for  customs,  taxes, 
or  any  of  the  uses  created  by  law  for  the  latter. 

§  3.  Inasmuch  as  the  Treasury  alone  can  coin  the  silver 
dollars,  and  since  at  least  $24,000,000  must  be  coined  every 
year,  the  effects  of  the  act  of  1878  are  to  be  studied  in  the 
statements  of  the  Treasury ;  so  that  only  by  following  the 
movements  of  this  public  office  can  it  be  seen  how  far  we 
have  progressed  in  the  transition  from  a  gold  to  a  silver  basis. 
The  relation  in  which  the  United  States  Treasury  stands  in 
this  matter  to  the  public  may  be  illustrated  by  comparing  the 
former  to  a  large  reservoir  into  which  a  steady  stream  is  pour- 
ing. People  about  the  reservoir  need  not  be  disturbed  with 
fears  of  a  flood  until  the  reservoir  becomes  full ;  then,  after 
that,  unless  the  stream  is  stopped,  the  whole  force  of  the 
stream  will  be  directly  poured  upon  the  community  without. 
To  know  what  has  been  the  effect  of  the  act  of  1878,  we 
must  inquire  whether  the  Treasury  has  yet  been  filled  with 
silver.  So  soon  as  that  happens,  then  the  country  must  pre- 
pare for  the  silver  deluge  and  the  disappearance  of  gold  and 
of  gold  prices.  In  order  to  make  this  examination,  I  have  pre- 
pared the  accompanying  tables  and  lines  in  Chart  XYI  from 
official  figures  given  by  the  Treasury  Department.  On  re- 
suming specie  payments,  in  January,  1879,  the  Secretary  had 
a  gold  reserve  of  about  $133,000,000  ;  but,  since  1878,  the 


Showing  the  tolai  amount  of  Standard  Silver  Dollars  coined,  outstanding  and  < 


CHART   XVI. 

.  Aam/,  and  the  amount  against  which  no  Silver  Certificaies  were  outstanding  ;    Silver  Certificates  outstanding,  and  the  amount  owned  hi/  the   Trensuri/ ;    and  Gold  Coin  owned  bi/  the   Treasury, 
less  amount  of  legal  reserve  of  $100^00,000,  for  the  date*  mentioned. 


To  August  1,        1884 

177,680,829 

"  September  1,    " 

180,030,829 

"  October  1,         " 

182,380,829 

"  November  1,     " 

184,730,829 

"  December  1,      " 

187,180,S2il 

"  January  1,      1886 

189,501,994 

"  February  1,       " 

191,947,194 

"  March  1, 

194,247,194 

"  April  1, 

196,697,394 

"  May  1, 

199,107,394 

"  June  1,              " 

201,609,231 

"  July  1, 

203,864,381 

Total  coiua^e  ofstimdArd  stiver  dollai 


8,673,600 
36,801,000 
63,734,750 
91,372,706 
119,144,780 
147,266,899 
176,356,829 


856,143 
7,442,411 
18,626,464 
28,123,406 
31,620,698 
34,893,389 
39,646,461 


Total  standard  silver  dollars  held  by  Treasury-offices  and 


7,718,357  m 
28,368,689  ■ 
45,108,296  m 
63,249,300 
87,624,182 

112,362,610 

136,810,368 


THE  PRESENT  SITUATION,  211 

issue  of  silver  dollars  which  are  receivable  for  customs,  just 
to  the  extent  to  which  they  are  used  by  importers  instead  of 
gold,  has  cut  off  the  channel  by  which  the  Government  is 
enabled  to  supply  itself  with  gold,  and  since  1881  the  gold 
reserve  in  the  Treasury  has  been  steadily  diminishing.  So 
that  now,  as  more  and  more  silver  has  been  put  out  by  the 
Treasury,  a  large  part  of  the  sums  paid  in  for  customs  duties 
is  in  silver  instead  of  gold.^  And,  inasmuch  as  the  United 
States  has  hitherto  paid  the  principal  and  interest  of  all  its 
obligations  in  gold,  it  will  be  found  that,  while  the  Treasury 
pays  out  gold,  the  supply  with  which  it  can  pay  is  becom- 
ing gradually  and  constantly  less.  It  is  only  a  question  of 
time,  therefore,  when  the  specie  reserve  of  the  United  States 
shall  be  changed  from  gold  to  silver  to  an  extent  which  will 
force  the  Secretary  to  pay  in  silver.  And  when  this  comes, 
then  the  silver  current  can  no  longer  be  dammed  up  and  shut 
off  from  the  country.  The  whole  quantity  of  the  annual  coin- 
age of  silver  dollars,  if  principal  and  interest  of  our  bonds  are 
paid  in  silver,  will  then  be  at  once  issued  to  the  public.  Then 
the  increasing  quantity,  too  great  for  the  needs  created  by  law 
for  the  dollar,  will  cause  them  to  accumulate  in  the  hands  of 
merchants,  who  can  then  dispose  of  them  only  at  their  intrin- 
sic value  as  bullion.  So  soon  as  any  depreciation  is  manifest, 
the  silver  will  begin  to  drive  out  the  gold  from  circulation. 
"We  shall  then  have  reached  a  silver  basis,  and  our  prices  will 
be  changed  to  suit  the  silver  standard.  In  the  existing  state 
of  trade  so  stupid  a  policy  can  not  be  too  harshly  condemned. 
The  United  States  Treasury  receives  and  makes  its  largest 
payments  at  its  principal  office  in  New  York,  the  Sub-Treas- 
ury in  Wall  Street.  For  its  own  convenience,  in  order  to 
save  the  transfer  of  large  sums  of  specie,  the  Sub-Treasury  at 
'New  York  has  become  a  member  of  the  JSTew  York  Clearing- 
House  Association,  composed  chiefly  of  national  banks.  The 
kind  of  money  the  Treasury  pays  out  at  its  principal  office, 
which  is  in  Kew  York,  is,  therefore,  closely  watched,  as  indi- 

'  In  the  forty-nine  months,  beginning  January,  1881,  $650,000  in  silver  and 
$102,654,000  in  silver  certificates  were  paid  in  for  customs  duties. 


212  THE  UNITED  STATES,   18Y3-1885. 

eating  its  general  condition.  As  its  dealings  are  with  the 
Clearing-House,  the  moment  it  begins  to  pay  the  Clearing- 
House  balances  against  it  in  silver  the  crisis  will  have  arrived. 
The  business  community  is  watching  with  fear  the  faintest 
sign  of  the  impending  calamity.  There  is  little  doubt  in  my 
mind  that  an  important  element  in  the  prevailing  distrust 
of  the  future,  and  the  extraordinary  accumulation  of  unem- 
ployed capital  in  the  surplus  reserves  of  the  banks,  is  the 
dread  in  the  business  community  of  silver  payments.  When 
the  Treasury  can  no  longer  retain  a  gold  basis,  then  the  pub- 
lic must  take  care  of  themselves. 

In  a  populous  town  there  was  once  placed  a  cage  of  wild 
beasts,  and  in  the  very  beginning  the  frailty  of  the  bars  gave 
timid  people  considerable  alarm  ;  but  the  mere  fact  that  the 
creatures  did  not  get  out  convinced  passers-by,  in  the  course 
of  years,  that  there  was  really  no  danger  after  all,  and  men 
hurried  past  the  animals,  hearing  the  sounds  of  their  baffled 
ferocity,  but  gave  them  no  great  attention.  Therefore,  when, 
on  an  uncomfortable  day  in  late  winter,  one  of  the  sub-keep- 
ers of  the  beasts  carelessly  sauntered  in  front  of  the  cage, 
and  casually  remarked  that  the  bars  of  the  cage  were  almost 
gnawed  through  (he  was  sorry  he  could  not  help  it),  and 
asked  the  by-standers  what  they  thought  of  it,  it  is  not  to  be 
wondered  at  that  a  sudden  paroxysm  of  alarm  seized  even 
sensible  men,  and  that  there  ensued  a  general  attempt  to  put 
a  barrier  between  them  and  possible  harm.  The  expression 
of  seriousness  under  the  assumed  carelessness  of  the  sub- 
keeper's  manner  seemed  to  imply  that  he  was  acting  under 
directions  from  his  superior,  and  that  it  meant  something. 
The  alarm  spread  at  once.  For  many  years  silver  dollars, 
like  the  beasts  in  our  fable,  were  kept  confined  in  the  Treas- 
ury, and  the  Government  was  not  forced  to  make  payments 
in  gold ;  but  on  the  21st  of  February,  1884,  it  was  believed 
that  the  silver  was  to  be  let  out.  The  sub-keeper  of  the 
fable  was,  in  fact,  the  Sub-Treasurer  in  Kew  Tork  city,  who 
addressed  the  manager  of  the  Clearing-House  Association  on 
the  probable  effect  of  his  paying  Government  balances  at 


THE  PRESENT  SITUATION.  213 

the  Clearing-House  ^  in  silver  dollars.  This  alarm,  however, 
passed  by,  for  no  attempt  to  pay  in  silver  was  finally  made 
at  that  time. 

Some  months  after  the  passage  of  the  Bland  bill  the 
■  Clearing-House  Association  (November  15,  1878)  decided  to 
refuse  silver  dollars  for  balances.  But  July  12, 1882,  in  an  act 
extending  the  charters  of  the  national  banks,  this  decision  of 
the  'New  York  banks  was  met  by  further  legislation,^  which 
forbade  any  national  bank  to  join  a  clearing-house  association 
that  refused  to  accept  silver  certificates  for  balances.  Inas- 
much as  the  largest  number  of  banks  in  the  association  were 
national  banks,  they  were  obliged  to  rescind  their  rule  (July 
14,  1882) ;  and  nominally  they  do  not  refuse  to  accept  silver 
certificates,  although  none  are  offered.  The  banks  of  the 
country  avoid  the  silver  certificates,  and,  in  view  of  the  great 
uncertainty  of  the  future,  have  accumulated  a  gold  reserve 
greatly  in  excess  of  the  legal  requirements.  In  the  statement 
for  December  20,  1884,  it  appeared  that  the  New  York 
banks  held  $70,816,147  in  gold  or  its  representatives,  and 
but  $2,022,803  in  silver  and  silver  certificates. 

In  August,  1884,  it  was  again  believed  that  the  condi- 
tion of  the  United  States  Treasury  required  payments  in 
silver,  but  the  emergency  was  tided  over.  February  10, 
1885,  the  Treasury  did  actually  pay  out  silver  to  a  certain 
amount  to  the  Clearing-House,  but  it  has  not  repeated  the  act 
since.  In  the  winter  session  of  Congress,  in  1885,  an  attempt 
was  made  in  the  House  late  in  the  session  to  suspend  the 
further  coinage  of  silver  dollars  by  adding  a  rider  to  an  ap- 
propriation bill,  and  it  came  within  a  few  votes  of  passing. 

1  On  joining  the  Association  the  Treasury  agreed  to  give  thirty  days'  notice 
of  its  intention  to  change  its  kind  of  payment,  which  was  then  gold. 

2  Act  of  July  12,  1882,  §  12.  .  .  .  "Such  (gold)  certificates,  as  also  silver 
certificates,  when  held  by  any  national  banking  association,  shall  be  counted  as 
part  of  its  lawful  reserve;  and  no  national  banking  association  shall  be  a  mem- 
ber of  any  clearing-house  in  which  mch  certificates  shall  not  be  receivable  in  the 
settlement  of  clearing-house  balances."  It  is  worth  noticing,  however,  whether 
"  such  certificates  "  does  not  refer  solely  to  gold  certificates,  described  at  length 
in  the  previous  section,  and  already  mentioned  as  "  such  certificates." 


214  THE  UNITED  STATES,   1873-1885. 

§  4.  The  present  Secretary  of  the  Treasury  has  made  it 
his  object,  evidently,  to  adhere  to  tlie  plan  of  gold  payments, 
if  possible.  Another  session  of  Congress  will  give  an  oppor- 
tunity to  save  the  country  from  a  single  silver  standard,  with 
all  the  evils  which  must  invariably  accompany  a  fluctuating 
and  unstable  medium  of  exchange.  In  order  to  hold  out 
against  the  pressure  of  the  silver  dollars,  the  Secretary  has 
decided  to  issue  no  more  of  one-  and  two-dollar  notes,  with 
the  expectation  that  the  silver  dollars,  when  issued  from  the 
Treasury,  will  not  at  once  return  to  it,  but  remain  in  circula- 
tion in  the  field  previously  occupied  by  small  notes. 

Another  plan  was  adopted  in  July,  1885,  to  keep  the  gold 
reserve  in  the  Treasury  intact.  The  associated  banks  of  New 
York  made  a  large  loan  of  gold  to  the  Secretary,  on  the  de- 
posit with  them  of  a  sum  of  fractional  silver  currency.  It 
has  been  stated  that  on  this  arrangement  the  banks  were 
willing  to  furnish  $20,000,000  of  gold,  but  that  the  Treas- 
ury has  cared  to  call  for  only  about  $6,000,000.  It  is  also 
said  that  the  transaction  is  not  a  loan,  but  a  final  exchange 
of  gold  for  the  fractional  silver. 


APPENDICES 


APPENDIX  I. 


A. 

Tables  of  the  Peoduotiox  of  Gold  and  Silver  ix  the  "World, 
1493-1850. 

[The  mark  has  been  computed  at  25  cents  (accurately  •238),  and  the  pound  sterling  at 
$5.00  (accurately  $4.8666).] 


SOETBEER.* 

TEAES. 

Value  of  Average  Annual  Production. 

Total  Production. 

Silver. 

Gold. 

Silver. 

Gold. 

1493-1520 

$2,115,000 

$4,045,500 

$59,220,000 

$113,274,000 

1521-1544 

4,059,000 

4,994,000 

97,416,00;) 

119,856,000 

1545-1560 

14,022,000 

5,935,400 

224,352,000 

94,968,000 

1561-1580 

13,477,500 

4,770,750 

269,550,000 

95,415,000 

1581-1600 

18,850,500 

5,147,500 

377,010,000 

102,950,000 

1601-1620 

19,030,500 

5,942,750 

380,610,000 

118,855,000 

1621-1640 

17,712,000 

5,789.250 

354,240,000 

115,785,000 

1641-1660 

16,483,500 

6,117,000 

329,670,000 

122,340,000 

1661-1680 

15,165,000 

6,458,750 

303,300,000 

129,175,000 

1681-1700 

15,385,500 

7,508,500 

307,710,000 

150,170,000 

1701-1720.... 

16,0(t2,000 

8,942,000 

320.040,000 

178,840,000 

1721-1740 

19,404,000 

13,308,250 

388,080,000 

266,165,000 

1741-1760 

23,991,500 

17,165,500 

479,830,000 

343,310,000 

1761-1780 

29,383,250 

14,441,750 

586,965,000 

288,835,000 

1781-1800 

39,557,750 

12,408,500 

791,155,000 

248,170,000 

1801-1810 

40,236,750 

12,400,000 

402,367,500 

124,000,000 

1811-1820 

24,334,750 

7,983,000 

243,347,500 

79,830,000 

1820-1830 

20,725,250 

9,915,750 

207,252,500 

99,157,500 

1831-1840 

26,840,250 

14,151,500 

268,402,500 

141,515,000 

1841-1850 

35,118,750 

38,194,250 

351,187,500 

381,942,500 

Total 

$6,741,705,500 

$3,314,553,000 

*  Petermann's  "  Mittheilungen,"  Ergiinzungshef t,  Nr.  57,  "  Edelmetall-Pro- 
duction,"  1879,  pp.  107-111.  Alexander  Del  Mar,  in  the  "  Report  of  the  United 
States  Silver  Commission  of  1876,"  vol.  i,  pp.  61-65,  gives  some  other  figures, 
but  they  can  not  be  depended  upon,  nor  can  his  figures  since  1850.  For  1858 
and  1859,  for  instance,  he  gives  $144,000,000  as  the  gold  product  according  to 
Sir  Hector  Hay,  when  the  latter's  figures  are  $124,000,000. 


218 


APPENDIX  I. 


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APPENDIX  I. 


219 


C. 


PRODrCTION   OF   GoLD   AND   SiLVER   IN   THE   WoRLD,    1876-1886. 


YEARS. 

BOBTBEER. 

DIEECTOE  OF  THE  U.  8.  MINT. 

Silver. 

Gold. 

Silver. 

Gold. 

1876 

$91,208,750 

96,738,750 

98,865,250 

95,285,250 

95,480,000 

99,168,250 

105,916,750 

108,582,000 

110,899,500 

$115,756,750 
125,165,000 
129,630,500 
116,699,250 
114,054,500 
110,810,250 
101,064,250 
100,822,250 
101,940,250 

1877  

1878 

$81,040,665 

94,882,177 

96,172,628 

96,704,978 

102,168,354 

111,821,623 

115,088,000 

116,564,000 

127,257,000 

130,383,000 

$113,947,173 
119,092,786 

108,778,807 
106  436  786 

1879 

1880 

1881 

103  023  078 

1882 

102,000,000 
95  SO''  000 

1883 

1884 

101,694,000 

102,975,000 

97,761,000 

1885 

1886 

APPENDIX  II. 


RELATIVE   VALUES  OF  GOLD  AND  SILVER. 

For  the  time  previous  to  the  discovery  of  America  there  are  many 
fanciful  estimates  of  the  relative  values  of  gold  and  silver.  Jacob*  thus 
briefly  sums  up  the  situation : 

"  Although  the  amount  of  silver  in  circulation  as  money  at  all  times 
must  have  been  greater  than  that  of  gold,  yet,  as  the  gold  has  six  times 
the  durability  of  silver,  the  relative  value  of  the  two  metals  to  each  other 
could  not  be  maintained  unless  the  mines  produced  the  two  metals  in 
proportion  to  the  loss  on  them  by  wear  respectively.  It  seems  probable 
that  the  due  proportion  was  kept  up  during  the  existence  of  the  Roman 
power,  and  through  the  dark  ages  which  succeeded,  till  the  discovery  of 
America,  and  till  the  dispersion  over  the  world  of  the  surplus  produce 
of  silver  above  that  of  gold.  The  value  of  gold  to  silver  had  varied  but 
little  before  the  mines  of  Potosi  were  discovered.  Among  the  Romans 
gold  to  silver  seldom  varied  more  than  from  nine  to  eleven  for  one, 
that  is,  a  pound  of  gold  was  rarely  worth  either  more  than  eleven  or 
less  than  nine  pounds  of  silver ;  nor  did  the  relative  value  of  the  metals 
fluctuate  more  in  the  long  course  of  centuries  to  the  time  when  the  new 
sources  of  mineral  wealth  in  the  western  world  were  in  full  activity." 


Average  Ratios  of  Silver  to  Gold,  bt  Periods,  stnoe  1500. 


Teabs. 

Ratio. 

Tbaks. 

Ratio. 

Teaes. 

Ratio. 

1501-1520 

10-75:1 

1701-1710.... 

15-27 

1801-1810... 

15-61:1 

1521-1540 

11-25 

1711-1720.... 

15-15 

1811-1820... 

15-51 

1541-1560 

11-30 

1721-1730.... 

15-09 

1821-1830... 

15-80 

1561-1580 

11-50 

1731-1740.... 

15-07 

1831-1840... 

15-75 

1581-1600 

11-80 

1741-1750...  . 

14-93 

1841-1850... 

15-83 

1601-1620 

12-25 

1751-1760.... 

14-56 

1851-1855... 

15-42 

1621-1640 

14-00 

1761-1770.... 

14-81 

1856-1860... 

15-30 

1641-1660 

14-50 

1771-1780.... 

14-64 

1861-1865... 

15-36 

1661-1680 

15-00 

1781-1790.... 

14-76 

1866-1870... 

15-56 

1681-1690 

14-98 

1791-1800.... 

15-42 

1871-1875... 

15-98 

1691-1700 

14-96 

'  "An  Historical  Inquiry  into  the  Production  and  Consumption  of  the 
Precious  Metals,"  pp.  300,  301. 

"  Given  by  Soetbeer,  in  "  Edelmctall-Prodnction,"  Petermann's  "  Mittheilung- 
en,"  Erganzungsheft,  Nr.  57,  1879,  pp.  126,  128-131. 


APPENDIX  n. 


221 


B. 


Ratios  of  Gold 

TO  Silver 

,    GIVEN 

Yearly 

SINCE  1687.* 

Exec.  Doc. 

Teab. 

Soetbeer. 

Yeab. 

Soetbeer. 

Tbab. 

Soetbeer. 

"White. 

117. 1st  ses- 
sion, 21st 
Congress. 

1687.. 

14-94 

1723.. 

15-20 

1760.. 

14-14 

14-16 

14-29 

1688.. 

14-94 

1724., 

15-11 

1689.. 

15-02 

1725,. 

15-11 

1761.. 

14-54 

13-81 

13-94 

1690.. 

15-02 

1726.. 

15-15 

1762.. 

15-27 

14-50 

14-63 

1727.. 

15-24 

1763.. 

14-99 

14-58 

14-71 

1691.. 

14-98 

1728.. 

15-11 

1764.. 

14-70 

14-78 

14-91 

1692.. 

14-92 

1729.. 

14-92 

1765.. 

14-83 

14-66 

14-69 

1693.. 

14-83 

1730.. 

14-81 

1766.. 

14-80 

14-28 

14-41 

1694.. 

14-87 

1767.. 

14-85 

1432 

14-45 

1695.. 

15-02 

1731.. 

14-94 

1768.. 

14-80 

14-45 

14-58 

1696.. 

15-00 

1732.. 

15-09 

1769.. 

14  72 

14-32 

14-45 

1697.. 

15-20 

1733.. 

15-18 

1770.. 

14-62 

14-22 

14-35 

1698.. 

15-07 

1734.. 

15-39 

1699.. 

14-94 

1735.. 

15-41 

1771,. 

14-66 

14-23 

14-36 

1700.. 

14-81 

1736.. 

15-18 

1772.. 

14-62 

14-06 

14-19 

1737.. 

15-02 

1773,. 

14-62 

14-60 

14-73 

1701.. 

1507 

1738.. 

14-91 

1774.. 

14-62 

14-92 

15-05 

1702.. 

15-52 

1739.. 

14-91 

1775.. 

14-72 

14-49 

14-62 

1703.. 

15-17 

1740.. 

14-94 

1776.. 

14-55 

14-21 

14-34 

1704.. 

15-22 

1777.. 

14-54 

13-91 

14-04 

1705.. 

15-11 

1741.. 

14-92 

1778.. 

14-68 

14-21 

14-34 

1706.. 

15-27 

1742.. 

14-85 

1779.. 

14-80 

14-76 

14-89 

1707.. 

15-44 

1743.. 

14-85 

1780.. 

14-72 

14-30 

14-43 

1708.. 

15-41 

1744.. 

14-87 

1709.. 

15-31 

1745.. 

14-98 

1781.. 

14-78 

13-70 

13-33 

1710.. 

15-22 

1746.. 

15-13 

1782.. 

14-42 

13-42 

13-54 

1747.. 

15-26 

1783.. 

14-48 

13-66 

13-78 

1711.. 

15-29 

1748. . 

15-11 

1784.. 

14-70 

14-77 

14-90 

1712.. 

15-31 

1749.. 

14-80 

1785.. 

14-92 

15-07 

16-21 

1713.. 

15-24 

1750.. 

14-55 

1786. 

14-96 

14-76 

14-89 

1714.. 

15-13 

1787.. 

14-92 

14-70 

14-83 

1715.. 

16-11 

1751.. 

14-39 

1788.. 

14-65 

14-58 

14-71 

1716.. 

1509 

1752.. 

14^4 

a 789.. 

14-75 

14-76 

14-89 

1717.. 

15-13 

1753.. 

14-54 

1790.. 

15-04 

14-88 

15-01 

1718.. 

15-11 

1754.. 

14-48 

1719.. 

15-09 

1755.. 

14-68 

1791.. 

15-05 

14-82 

14-95 

1720.. 

15-04 

1756.. 

14-94 

1792.. 

15-17 

14-30 

14-43 

1757.. 

14-87 

1793.. 

15-00 

14-88 

15-01 

1721.. 

15-05 

1758.. 

14-85 

1794.. 

15-37 

15-18 

15-32 

1722.. 

15-17 

1759.. 

14-15 

1795.. 

15-55 

14-64 

14-77 

'  In  parallel  columns  are  given  the  various  tables  of  different  writers.  Soet- 
beer's  are  taken  from  the  official  quotations  of  the  price  of  silver  in  Hamburg 
by  the  Handels  Vorstand,  recorded  twice  a  week  since  1687.  They  are  abso- 
lutely trustworthy.  After  1833,  Pixley  and  Abell's  London  tables  are  accepted 
by  every  one.  The  variance  occurs,  therefore,  before  1838.  Other  tables  than 
Soetbeer's  do  not  begin  until  1760. 
16 


222 


-APPENDIX  11. 


B — Continued 

Exec.  Doc. 

Exec.  Doc. 

Yeab. 

Soetbeer. 

White. 

117,  1st  ses- 
sion. 21st 
Congress. 

Yeab. 

Soetbeer. 

White. 

117,  Ist  ses- 
sion, 21st 
Congress. 

4796.. 

15-65 

14-64 

14-77 

1815.. 

15-26 

16-15 

16-30 

1797.. 

15-41 

15-31 

15-45 

1816.. 

15-28 

13-52 

13-64 

1798.. 

15-69 

15-31 

15-45 

1817.. 

15-11 

15-44 

15-58 

1799.. 

15-74 

1414 

14-29 

1818.. 

15  35 

15-28 

15-42 

1800.. 

15-68 

14-68 

14-81 

1819.. 

15-33 

16-68 

15-82 

1820. . 

15-62 

15-57 

15-71 

1801.. 

15-46 

14-33 

14-47 

1802.. 

15-26 

15-09 

15-23 

1821.. 

15-95 

15-84 

15-98 

1803.. 

15-41 

14-33 

14-47 

1822.. 

15-80 

15-77 

15-91 

-1804.. 

15-41 

14-54 

14-67 

1823.. 

15-84 

15-77 

15-91 

^4805.. 

15-79 

15  00 

15-14 

1824.. 

15-82 

15-05 

15-64 

—1806.. 

15-52 

14-12 

14-25 

1825.. 

15-70 

15-55 

16-69 

1807.. 

1543 

14-33 

14-46 

1826.. 

15-76 

16-05 

15-69 

1^08.. 
-^09.. 

16-08 

14-66 

14-79 

1827.. 

15-74 

15-63 

15-77 

15-96 

16-00 

16-25 

1823.. 

15-78 

15-63 

15-77 

1810.. 

15-77 

16-00 

16-15    ; 

1830., 

15-78 
16-82 

15-81 

1595 

1811.. 

15-53 

15-58 

15-72 

1812.. 

1611 

14-09 

15-04 

1831.. 

15-72 

1813.. 

16-25 

14-04 

14-53 

1832.. 

15-73 

1814.. 

15-04 

15-71 

15-85 

The  table  headed  "  White  "  was  prepared  by  John  White,  the  cashier 
of  the  United  States  Bank,  in  a  Report  to  the  Secretary  of  the  Treasury, 
November  16,  1829.  (See  "Report  of  1878,"  pp.  647-649;  also  cf.  p. 
624.)  Accompanying  White's  table  are  the  following  authorities:  "Mr. 
Mushet,  Mr.  Wheatly,  '  Monthly  Magazine,'  '  Bullion  Report,'  Mr.  Tooke, 
Mr.  Ricardo,  Chancellor  of  the  Exchequer,  Governor  of  the  Bank."  This 
is  a  varied  list. 

Soetbeer  has  pointed  out  that  White's  table  is  untrustworthy,  because 
we  have  no  knowledge  what  sort  of  quotations  were  used,  nor  how  the 
averages  were  calculated.  Owing  to  the  issue  of  paper  between  1797 
and  1819,  the  period  of  the  Bank  Restriction  Act,  the  Hamburg  quota- 
tions would  unquestionably  be  more  reliable.  Soetbeer  has  pointed  out 
what  seem  to  be  palpable  errors  in  the  White  table.  In  1761  it  is  quite 
improbable  that  the  ratio  fell  below  14 : 1  and  then  rose  the  next  year 
5  per  cent.     Moreover,  in  White's  table  the  following  ratios  occur: 

1781 13-33,  corresponding  to  70|  d. 

1782 13-54,  "  69|d 

1783 13-78,  "  68^  c?. 

1784 14-90,  "  63|d 

while  the  Hamburg  quotations  give  : 

1781 14-78,  corresponding  to  63fc?. 

1782 14-42,      "       &^d. 

1783 14-48,      "       m^d. 

1784 14-70,      "       &^d. 


APPENDIX   n. 


223 


There  is  absolutely  no  known  reason  to  account  for  so  sudden  a  change 
as  that  indicated  by  White's  figures  in  1784,  while  at  Hamburg  the  ratio 
remained  steady,  or  nearly  so. 

In  addition  to  this,  Jefferson  says  that  the  market  ratio  in  1782  was 
1 :  14'5  in  the  United  States,  and  Morris  points  to  the  fact  that  the  ratio 
was  nearly  1:15  in  England  ("  Eeport  of  1878,"  pp.  428,  441).  The 
figures  of  White  for  the  years  1812,  1813,  and  1816  are  undoubtedly 
incorrect.  According  to  his  ratios,  silver  changed  between  1810  and 
1816  from  a  ratio  of  13*52  : 1  to  16-15  : 1,  for  which  there  appears  to 
be  no  sufficient  reason  in  the  facts  known  to  us.  It  seems  as  if  the  fig- 
ures of  13-52  for  1816  were  a  mistake  for  15-52. 

For  these  reasons  I  can  not  place  much,  if  any,  reliance  on  White's 
table,  and  have,  therefore,  followed  Soetbeer's  figures  in  the  course  of 
my  investigation. 

The  table  given  above,  from  a  United  States  document,  is  evidently 
based  on  the  same  material  as  White's.  Although  in  every  ratio  the 
figures  are  different  from  White's,  yet  the  differences  are  usually  very 
slight  (except  for  1812),  and  follow  the  same  general  direction.  Even 
in  the  exceptional  figures  of  1781-1783,  and  1816,  there  is  the  same 
trouble  as  in  White's  table.  These  figures  are  given  in  the  "  Report  of 
1878,"  p.  583 ;  are  made  the  basis  of  a  table  of  ratios  by  Alexander  Del 
Mar  in  the  "  Report  of  the  United  States  Silver  Commission  of  1877," 
vol.  i,  appendix,  p.  67;  are  stated  in  C.  P.  White's  "Report,  No.  278, 
1833-1834,"  p.  96  ;  and  are  quoted  by  H.  R.  Linderman,  in  his  report  as 
Director  of  the  Mint,  1876,  p.  46.  But  the  table,  as  well  as  the  White 
table,  can  be  regarded  as  not  sufficiently  trustworthy  to  base  any  con- 
clusions upon. 

c. 

PiXLEY    AXD   AbELl's   TaBLES   OF   THE    RaTIOS   OF    GoLD   TO    SiLVEB 

SINCE  1833. 


Tear. 

Eatio. 

1  Teak. 

1 

Ratio. 

Teak. 

Ratio. 

Teak. 

Ratio. 

1833 

15-93 

1847 

15-80 

1861 

15-26 

1875 

16-62 

1834 

15-73 

1^& 
■^849 

15-85 

1862 

15-35 

1876 

17-77 

1835 

15-80  ^ 

15-78 

1863 

15-37 

1877 

17-22 

1836 

15-72 

1850 

15-70 

1864 

15-37 

1878 

17-92 

1837 

15-83 

1865 

15-44 

1879 

18-39 

1838 

15-85 

1851 

15-46 

1866 

15-43 

1880 

18-06 

1839 

15-t>2 

1852 

15-59 

18^7 
•^*r868 

15-57 

1840 

15-62 

1853 

15-.S3 

15-59 

1881 

18-24 

1854 

15-33 

1869 

15-60 

1882 

18-27 

1841 

15-70 

1855 

1538 

1870 

15-57 

1883 

18-64 

1842 

15-87 

1856 

15-38 

1884 

18-58 

1843 

15-93 

1857 

15-27 

1871 

15-57 

1885 

19-39 

1844 

15-85 

1858 

15-38 

1872 

15-65 

1886 

20-78 

1845 

15-92 

1859 

15-19 

1873 

15-92 

1846 

15-90 

1860 

15-29 

1874 

16-17 

3 


224 


APPENDIX  n. 


D. 

Average  Yeably  Price 
OF  Standard  Silver 
PER  OiTNOE  IN  Lon- 
don, 1833-1884. 

{^Taken  from   Pixley   and 
AbelVs  Tables.'\ 


a   . 

'"4 

■E(2 

< 

1833 

59^ 

1859 

62iV 

1834 

59M 

1860 

61H 

1835 

59H 

1836 

60 

1861 

60|f 

1837 

59-1% 

1862 

61i^,r 

1838 

59^ 

1863 

61f 

1839 

60| 

1864 

61f 

1840 

60f 

1865 

61A 

1866 

6H 

1841 

60A 

1867 

60-1% 

1842 

b'd^s 

1868 

60i 

1843 

59i=V 

1869 

60:V 

1844 

59i 

1870 

60A 

1845 

59^ 

1846 

59A 

1871 

60^ 

1847 

59i^ 

1872 

60A 

1848 

59^ 

1873 

59^ 

1819 

59  J 

1874 

58A 

1850 

60tV 

1875 

56^ 

1876 

523 

1851 

61 

1877 

54|i 

1852 

601 

1878 

52-1% 

1853 

6H 

1879 

6U 

1854 

61i 

1880 

52^ 

1855 

61A 

1856 

61 A 

1881 

51ii 

1857 

6lf 

1882 

51f 

1858 

61-1% 

1883 

50,% 

1884 

m 

^ 


n 

Id 

P 

to                                  -+3 

1     1     1     1     L  1    1    J     1     1     1     1     1    1     1    1 

O0300t~C0lOC003C<)i— 11— 10005<0>0 

n 

> 
o 

^0100QOCDlC10C:'OTr-i(>5i-iCO-t~t~ 

1    1    1    1    1    1    1    1    1    1    1    i    1    1    1    1 

H 

n 
O 

"to                _to      ^to      .cj-ij 

0005I>1—  COlO^CO^MlMi— li— lO-t~>a 

1     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1 

r+5.            T-tM,;:jXK(-r            ttJXr^51™„„|„_|„r^MHx1«  '+*'+' 

OOOOt-tDO^TtlOSi-lr-I^^OO-t--^ 

<:S 

a 

K 

» 

02 

nkc^to                    _to                           Mte  tou^to 
0005CX)CO<MinC]^CM.-i(MCOOClO 

1       1       1       1       1       1       1       1       1       1       1       1       1       1       1       1 

^tonto       -to 

IC|<X    VH-KIX  -.H-|x  r-|»  r^J)  C^X  «ttC|x  n|-*^X  ^JOO  r+*  lC|CD 
OO00t~tDi-l-*rtr-ICMrHr-<OO-t-lM 

1 

s 

P 
O 

< 

'■o                                                            to               ^X) 
nt-T -+»    .- '^'=<:  i-Jx  K)*  rtli'nit  Hx  K  X  Hx    1- .dx  ^4x    ,'-"nl» 
OOOJOOCDCO'*!Mr-(Mi— ic^coosirJ 

''  Jo  '''''''''   L  Llo ' 

C'000£-tOO-*<Mi-iC-l  —  t-lOOCO(M 

1-5 

icjx^— rtjxr-^HxHi^H^^— I—— ta:^-x«^x         i-^Hxf-4^'    ,-< 
0002CO»Ci— i-^ClSNC-lCllMCOOS-* 

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^|^-V'a„H^npc-(-fHxH'-        -iMfJxc-Jx"^-    2_ti> 
<rO0500>0iXiC0(M^<MO-^OO0i<n 

O 
1? 

„to                                        ^to              "'■■=              •cto„to 
=^-_|xH^       »«»             ""I-       Hx-l-n(xMlTfH-'"-a(i> 
coo5aiicc<iThcococ<ii— i(MOOo>»o 

1     1     1     1     1     1     1     1     1     1     1     1     1     1    1     1 

u^to                                          to                 to             -Id 
«fx       ""!— jfN— In       h^— 1^— 1>^    I—       Hx    1— irjx       -+^ 
OOOSOOlOOCOC-li-iS-lr-i-iCOOS-* 

g 

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53 

CO0500t-'T)<T)<C0f-i(M(Mi?5OOO«0 

)    1    1    1    1    1    1    1    1    1    1    1    (^  1    I   1 

'^-'l-Ktx-l'^'-il'N        «|x-|Tf        "f-r^n-tr.'^|rHM|^'^"'-n|# 
OO05Q0t0(MC0TOO<M-^(MCOQ0Tj" 

-5J 

P. 
< 

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CO          05t^-*»0-'*<C<M<MC<Oi— lOatO 

OOOSOOt^COCCCOOSi— ICMC<IOOOO«0 

toi:o>oia»oiOiOiOTj'>oioioio»o->*iTt< 

i 

— 1*1  wx  Hx  wl«  — ht— K— Ix         — tn-- ^JJ^4x^i— "p"pi"  — r-flo 

1    1    1    1    1    1    1    1    1    1    1    1    1    1  T  T 

-to       -ID 
Wtxe^wH-— ^N        — 1^— !■*— IxHxMf*         t-fxrtf^- 1—       — ;— 
OO0SQ0t~C<lC0-«l<00r-i(M.-lOOa>«0 

u:|x-lx-l-        -fNHxn|*-|-*-|t"-Hx-'l-        «tx', ^H 

Oi-iOiS5t--J<l-iOOC"l<M<M^i-iaJCO 

1     1     1     1     1     1     1     1     1     1     1     1     1     1     1     1 

icto                              f^to 

-^PTH-W-f— ImC^X                          — 1—— J>i              — Irt              CW>            — 1— r-lCl 

C00500t~<M«Oe005C<Ii-l'MO'-lOC<» 

t4 
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b 
z 
•< 

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cfxHx-l— |-Nu:|x-|x-lri.              m:-*Mrt-lx"l- 
OO0535t-t0G0-^i-<<Mi-'0'5Or-<Olr- 

1    1    1    1    1    1    1    1    1    1    1    1    1    1   1    [^ 

-|!Nir:|xc**        -|»^^1X^^x-|•^J«x-|•»        -1-        tcHtabon- 
OO0500t~-<tc£>C003(M— 11— iCOOJiXl 

'-l(MCi5->*l»OCOt-COOlOi— itMCStJIiOeO 
OOOOQOOOOOOOOOOOQOOOOOOOOOOOOOOO 

APPENDIX  II. 


225 


F. 


Eatios  of 

Silver  to  Gold,  by  Months,' 

FEOM    1845    TO 

1880 

i 

Jan. 

Feb. 

Mar. 

Apr. 

May 

June. 

July. 

Aug. 

Sept. 

Oct. 

Nov. 

Dec. 

3   aP 

<   1 

1845 

15-85 

15-93 

15-95 

16-05 

16-33 

15-98 

15-95 

15-88 

15-88 

15-82 

15-80 

15-92 

15-93 

1846 

15-90 

15-93 

15-93 

15-95 

15-98 

15-98 

15-97 

15-95 

15-95 

15-93 

15-73 

15-68 

15-91 

1847 

15-68 

15-63 

15-63 

15-65 

15-98 

15-97 

15-93 

15-73 

15-78 

15-92 

15-95 

15-95 

15-83 

1S4S 

15-95 

15-90 

15-93 

15-95 

15-97 

15-85 

15-85 

15-77 

15-78 

15-77 

15-83 

15-85 

15-87 

1849 

15-97 

15-78 

15-73 

15-75 

15-75 

15-83 

15-83 

15-77 

15-80 

15-88 

15-85 

15-85 

15-81 

1850 

15-83 

15-83 

15-83 

15-83 

15-83 

15-83 

15-78 

15-73 

15-72 

15-65 

15-52 

15-33 

15-72 

1851 

15-30 

15-33 

15-33 

15-33 

15-43 

15-43 

15-52 

15-49 

15.57 

15-65 

15-62 

15-52 

15-46 

1853 

15-53 

15-59 

15-63 

15-68 

15-75 

15-73 

15-64 

15-63 

15-62 

15-49 

15-32 

15-35 

15-58 

1853 

15-36 

15-38 

15-36 

15-36 

15-41 

15-46 

15-35 

15-30 

15-21 

15-40 

1514 

15-27 

15-33 

ia54 

15-37 

15-39 

15-36 

15-36 

15-37 

15-36 

15-36 

15-40 

15-36 

15-40 

15-36 

15-.32 

15-33 

1855 

15-33 

15-33 

15-36 

15-53 

15-43 

15.33 

15-33 

15-33 

15-29 

15-36 

15-41 

15-36 

15-36 

1856 

15-40 

15-38 

15-47 

15-46 

15-43 

15-43 

15-40 

15-35 

15-34 

15-21 

1515 

15-18 

15-34 

1857 

15-19 

15-34 

15-37 

15-37 

15-33 

15-36 

15-29 

15-34 

15.32 

15-26 

15-39 

15-26 

15-27 

1858 

15-35 

15-37 

15-33 

15-36 

15-33 

15-;33 

15-44 

15-47 

15-51 

15-40 

15-29 

15-30 

15-36 

1859 

15-34 

15-37 

15-36 

1518 

15-13 

1.519 

1513 

15-31 

15-27 

15-21 

15-21 

15-31 

15-21 

1860 

15-18 

1519 

1.5-18 

15-39 

15-30 

15-40 

15-44 

15-36 

15-.30 

15-29 

15-32 

15-35 

15-30 

1861 

15-38 

15-41 

15-34 

15-44 

15-43 

15-57 

15-67 

15-64 

15-57 

15-52 

15-47 

15-43 

15-48 

1863 

15-35 

15-33 

15-38 

15-41 

15-40 

15.33 

15-46 

15-41 

15-38 

15-.33 

15-21 

15-39 

15-36 

1863 

15-39 

15-33 

15-33 

15-43 

15-38 

15-35 

15-44 

15-46 

15-43 

15 -.38 

15-35 

15-35 

15-38 

1864 

15-33 

15-33 

15-33 

15.54 

15-46 

15-40 

15-41 

15-38 

15.33 

15-46 

15-47 

15-39 

15-39 

1865 

15-33 

15-35 

15-41 

15-54 

15-54 

15-57 

15-55 

15-54 

15-51 

15-44 

15-10 

15-33 

15-43 

1866 

15-33 

1543 

15-47 

15-ft5 

15-33 

15-19 

15-35 

15-57 

15-51 

15-46 

15-47 

15-49 

15-44 

1867 

15-49 

15-53 

15-53 

15-46 

15-55 

15-.59 

15.59 

15-60 

15-63 

15-61 

15-66 

15-61 

15-57 

1868 

15-63 

15-59 

15-54 

15-55 

15-59 

15-62 

15-61 

15-64 

15-66 

15-64 

15-59 

15-.54 

15-61 

1869 

15-53 

1,5-49 

15-,57 

15-57 

15-65 

15-68 

15-64 

15-64 

15-60 

15-61 

15-59 

15-59 

15-60 

1870 

15-57 

15-60 

15.59 

15-61 

15-60 

15-60 

15-45 

15-59 

15-62 

15-59 

15-56 

15-58 

15-60 

1871 

15-57 

15-.58 

15-61 

15-60 

15-66 

15-63 

15-57 

15-54 

15.52 

15-60 

15-50 

15-53 

15-58 

1873 

15-50 

15-45 

15-51 

15-57 

15-68 

15-70 

15-68 

15-68 

15-61 

15-70 

15-85 

15-79 

15-64 

18731  15-75 

15-75 

15-75 

15-78 

15-83 

15-88 

15-90 

15-96 

1600 

1605 

16-26 

16-25 

15-93 

1874!  16  05 

16-05 

16-00 

16-01 

1606 

1606 

16-96 

16-26 

16-32 

16-33 

16-26 

16-40 

16-16 

1875 

16-38 

16-43 

16-51 

16-47 

16-61 

16-74 

16-90 

16-76 

v;m 

16-56 

16-61 

16-74 

16-63 

1876 

16-98 

17-38 

17-67 

17.55 

17-80 

17-24 

19-59 

18-07 

18-21 

17-96 

17-50 

16-65 

17-80 

1877 

16-:35 

16-54 

17-16 

17-40 

17-43 

17-59 

17-44 

17-42 

17-32 

17-13 

17-30 

17-20 

1719 

1878 

17-53 

17-m 

17-30 

17-44 

17-63 

17-76 

17-92 

17-97 

18-33 

18-71 

18-65 

18-87 

17-96 

1879 

18-84 

18-88 

19-03 

18-97 

18-47 

18-18 

18-18 

18-29 

18-29 

18-11 

17-66 

17-94 

18-39 

1880 

17-96 

18-05 

18-14 

18-13 

18-09 

17-97 

17-90 

17-90 

18-02 

18-11 

18-23 

18-19 

1806 

G. 

Method  of  computing  the  Ratio  from  the  London  Price  of  Silver. 

Hale. — Divide  the  number  943  by  the  number  of  pence  at  which  sil- 
ver is  quoted. 

In  Great  Britain  1869  sovereigns  are  to  be  struck  out  of  40  pounds 

troy  of  gold,  44  fine :  and  one  ounce  would  be  coined  into sover- 

•^       ^      '  ^         '  40x12 

eigns,  or  £3  17s.  lO^d.,  or  934^<Z.,  {^  fine.     The  ounce  of  pure  gold, 

therefore,  is  worth  934|(Z.  x  \\. 

If  an  ounce  of  silver  of  British  standard,  f  i  fine,  is  quoted  at  x  pence, 

an  ounce  of  pure  silver  would  be  worth  x  x  f^  pence. 

*  Computed  by  Dr.  0.  J.  Broch.     See  "  French  Report  on  Conference  of 
.1881,"  i,  p.  58. 


226  APPENDIX  II. 

The  ratio  of  the  value  of  an  ounce  of  pure  gold  to  an  ounce  of  pure 

silver  would  be,  therefore, 

934ixU     934ixUxn     942-995454  ,    943 
— = — — —= ,  or  nearly  — 

XX^  XX  X 

Method  of  computing  the  Value  of  a  Silver  Dollab  from  New 
York  Quotations. 

Rule. — Multiply  the  price  per  ounce  by  '77^. 

The  New  York  quotations,  as  given  in  the  financial  columns  of  the 
daily  press,  make  allowance  for  changes  from  the  Loudon  prices,  due  to 
the  rate  of  exchange,  etc. ;  but  the  quotations  are  for  pure  silver,  that 
is,  for  silver  1,000  fine: 

In  1,000  412^-gr.  dollars  are  859|  ounces  of  silver  900  fine. 
"      "     trade  "         "    875  "      "       "       "      " 

"  $1,000  subsid.  coin       "    803i       "      "      "      "      " 

Since  the  New  York  quotations  are  given  for  silver  1,000  fine,  but 
since  our  coins  are  made  of  silver  900  fine,  the  quotation  should  be  mul- 
tiplied by  only  -^^  of  the  actual  weight  of  the  coins.  The  859f  ounces 
less  ^  is  773'4375 ;  and  to  multiply  this  last  number  by  the  quotation 
would  give  the  value  of  1,000  silver  dollars.  But  the  value  of  one  dol- 
lar can  be  found  by  multiplying  the  price  by  -^^^^  — ,  or,  approximate- 
ly, by  -77*. 


APPENDIX  III. 


A. 

Laws  of  the  United  States  relating  to  Coinage. 

I.  Apeil,  1792. — An  Act  establishing  a  Mint,  and  regulating  the  Coins 
of  the  United  States. 

Sec.  9.  And  be  it  further  enacted.  That  there  shall  be  from  time  to 
time  struck  and  coined  at  the  said  Mint  coins  of  gold,  silver,  and  cop- 
per of  the  following  denominations,  values,  and  descriptions,  viz. : 
Eagles — each  to  be  of  the  value  of  ten  dollars  or  units,  and  to  contain 
two  hundred  and  forty-seven  grains  and  four  eighths  of  a  grain  of  pure, 
or  two  hundred  and  seventy  grains  of  standard  gold. 

[Half-eagles  and  quarter-eagles  of  corresponding  weights  and  fineness.] 

DoLLAKS  OR  Units — Each  to  be  of  the  value  of  a  Spanish  milled  dol- 
lar as  the  same  is  now  current,  and  to  contain  three  hundred  and  seven- 
ty-one grains  and  four  sixteenth  parts  of  a  grain  of  pure,  or  four  hun- 
dred and  sixteen  grains  of  standard  silver. 

[Half-dollars,  quarter  -  dollars,  dimes,  and  half -dimes  of  corresponding 
weights  and  fineness.] 

Seo.  11.  And  be  it  further  enacted,  That  the  proportional  value  of 
gold  to  silver  in  all  coins  which  shall  by  law  be  current  as  money  within 
the  United  States  shall  be  as  fifteen  to  one,  according  to  quantity  in 
weight,  of  pure  gold  or  pure  silver;  that  is  to  say,  every  fifteen  pounds 
weight  of  pure  silver  shall  be  of  equal  value  in  all  payments  with  one 
pound  weight  of  pure  gold,  and  so  in  proportion  as  to  any  greater  or  less 
quantities  of  the  respective  metals. 

Seo.  14.  And  be  it  further  enacted.  That  it  shall  be  lawful  for  any 
person  or  persons  to  bring  to  the  said  Mint  gold  and  silver  bullion,  in 
order  to  their  being  coined;  and  that  the  bullion  so  brought  shall  be 
there  assayed  and  coined  as  speedily  as  may  be  after  the  receipt  thereof^ 
and  that  free  of  expense  to  the  person  or  persons  by  whom  the  same 
shall  have  been  brought.  And  as  soon  as  the  said  bullion  shall  have 
been  coined,  the  person  or  persons  by  whom  the  same  shall  have  been 
delivered,  shall,  upon  demand,  receive  in  lieu  thereof  coins  of  the  same 


228  APPENDIX  m. 

species  of  bullion  which  shall  have  been  so  delivered,  weight  for  weight, 
of  the  pure  gold  or  pure  silver  therein  contained :  Provided  nevertheless^ 
That  it  shall  be  at  the  mutual  option  of  the  party  or  parties  bringing 
such  bullion,  and  of  the  director  of  the  said  Mint,  to  make  an  immediate 
exchange  of  coins  for  standard  bullion,  with  a  deduction  of  one-half  per 
cent  from  the  weight  of  pure  gold,  or  pure  silver  contained  in  the  said 
bullion,  as  an  indemnification  to  the  Mint  for  the  time  which  will  neces- 
sarily be  required  for  coining  the  said  bullion,  and  for  the  advance  which 
shall  have  been  so  made  in  coins. 

Seo.  16.  And  he  it  further  enacted,  That  all  the  gold  and  silver  coins 
which  shall  have  been  struck  at  and  issued  from  the  said  Mint  shall  be 
a  lawful  tender  in  all  payments  whatsoever,  those  of  full  weight  accord- 
ing to  the  respective  values  herein  before  declared,  and  those  of  less  than 
full  weight  at  values  proportional  to  their  respective  weights. 

[Approved,  April  2,  1'792.     1  Statutes  at  Large,  246.] 

II.  June,  1834. — An  Act  concerning  the  gold  coins  of  the  United  States^ 
and  for  other  purposes. 

Be  it  enacted,  .  .  .  That  the  gold  coins  of  the  United  States  shall 
contain  the  following  quantities  of  metal,  that  is  to  say :  each  eagle  shall 
contain  two  hundred  and  thirty-two  grains  of  pure  gold,  and  two  hun- 
dred and  fifty-eight  grains  of  standard  gold ;  each  half-eagle  one  hun- 
dred and  sixteen  grains  of  pure  gold,  and  one  hundred  and  twenty-nine 
grains  of  standard  gold;  each  quarter-eagle  shall  contain  fifty-eight 
grains  of  pure  gold,  and  sixty-four  and  a  half  grains  of  standard  gold  ; 
every  such  eagle  shall  be  of  the  value  of  ten  dollars ;  every  such  half- 
eagle  shall  be  of  the  value  of  five  dollars;  and  every  such  quarter-eagle 
shall  be  of  the  value  of  two  dollars  and  fifty  cents ;  and  the  said  gold 
coins  shall  be  receivable  in  all  payments,  when  of  full  weight,  according 
to  their  respective  values ;  and  when  of  less  than  full  weight,  at  less 
values,  proportioned  to  their  respective  actual  weights. 

Seo.  2.  And  be  it  further  enacted.  That  all  standard  gold  or  silver 
deposited  for  coinage  after  the  thirty-first  of  July  next  sliall  be  paid  for 
in  coin,  under  the  direction  of  the  Secretary  of  the  Treasury,  within  five 
days  from  the  making  of  such  deposit,  deducting  from  the  amount  of 
said  deposit  of  gold  and  silver  one  half  of  one  per  centum :  Provided, 
That  no  deduction  shall  be  made  unless  said  advance  be  required  by  such 
depositor  within  forty  days. 

Sec  3.  A^id  be  it  further  enacted,  That  all  gold  coins  of  the  United 
States,  minted  anterior  to  the  thirty-first  day  of  July  next,  shall  be  re- 
ceivable in  all  payments  at  the  rate  of  ninety -four  and  eight  tenths  of  a 
cent  per  pennyweight. 

[Approved,  June  28,  1834.     4  Statutes  at  Large,  699.] 


APPENDIX  m.  229 

III.  January,  1837. — An  Act  supplementary  to  the  act  entitled  '■'•  An  Act 
establishing  a  Mint,  and  regulating  the  coin^  of  the  United  States.''^ 

Seo.  8.  And  be  it  further  enacted,  That  the  standard  for  both  gold 
and  silver  coins  of  the  United  States  shall  hereafter  be  such  that  of  one 
thousand  parts  by  weight,  nine  hundred  shall  be  of  pure  metal  and  one 
hundred  of  alloy  ;  and  the  alloy  of  the  silver  coins  shall  be  of  copper ; 
and  the  alloy  of  the  gold  coins  shall  be  of  copper  and  silver,  provided 
that  the  silver  do  not  exceed  one  half  of  the  whole  alloy. 

Seo.  9.  And  be  it  further  enacted,  That  of  the  silver  coins,  the  dol- 
lar shall  be  of  the  weight  of  four  hundred  and  twelve  and  one  half 
grains;  the  half-dollar  of  the  weight  of  two  hundred  and  six  and  one 
fourth  grains;  the  quarter-dollar  of  the  weight  of  one  hundred  and 
three  and  one  eighth  grains ;  the  dime,  or  tenth  part  of  a  dollar,  of  the 
weight  of  forty-one  and  a  quarter  grains ;  and  the  half-dime,  or  twen- 
tieth part  of  a  dollar,  of  the  weight  of  twenty  grains  and  five  eighths 
of  a  grain.  And  that  dollars,  half-dollars,  and  quarter-dollars,  dimes 
and  half-dimes,  shall  be  legal  tenders  of  payment,  according  to  their 
nominal  value,  for  any  sums  whatever. 

Sec.  10.  And  be  it  further  enacted.  That  of  the  gold  coins,  the 
weight  of  the  eagle  shall  be  two  hundred  and  fifty-eight  grains ;  that 
of  the  half-eagle  one  hundred  and  twenty-nine  grains;  and  that  of  the 
quarter-eagle  sixty-four  and  one  half  grains.  And  that  for  all  sums 
whatever  the  eagle  shall  be  a  legal  tender  of  payment  for  ten  dollars, 
the  half-eagle  for  five  dollars,  and  the  quarter-eagle  for  two  and  a  half 
dollars. 

Sec.  11.  And  be  it  further  enacted,  That  the  silver  coins  heretofore 
issued  at  the  Mint  of  the  United  States,  and  the  gold  coins  issued  since 
the  thirty-first  day  of  July,  one  thousand  eight  hundred  and  thirty-four, 
shall  continue  to  be  legal  tenders  of  payment  for  their  nominal  values, 
on  the  same  terms  as  if  they  were  of  the  coinage  provided  for  by  this 
act. 

[Approved,  January  18,  1837.     5  Statutes  at  Large,  136.] 

IV.  March,  1849. — An  Act  to  authorize  the  Coinage  of  Gold  Dollars 

and  Double  Eagles. 
[This  act  authorizes  the  coinage  of  gold  dollars  and  double  eagles,  "  con- 
formably in  all  respects  to  the  standard  for  gold  coins  now  established  by  law," 
and  to  be  a  legal  tender  in  payment  for  all  sums.] 

[Approved,  March  3,  1849.     9  Statutes  at  Large,  39'7.] 


230  APPENDIX  ni. 

V.  Febbuaet,  1853. — An  Act  amendatory  of  Existing  Laws  relative  to 
the  Half-Dollar^  Quarter-Dollar^  Dime,  and  Half-Dime. 

Be  it  enacted,  .  .  .  That  from  and  after  the  first  day  of  June,  eight- 
een hundred  and  fifty-three,  the  weight  of  the  half-dollar  or  piece  of 
fifty  cents  shall  be  one  hundred  and  ninety-two  grains,  and  the  quarter- 
dollar,  dime,  and  half-dime  shall  be,  respectively,  one  half,  one  fifth,  and 
one  tenth  of  the  weight  of  said  half-dollar. 

Seo.  2.  And  be  it  further  enacted,  That  the  silver  coins  issued  in 
conformity  with  the  above  section  shall  be  legal  tenders  in  payment  cf 
debts  for  all  sums  not  exceeding  five  dollars. 

Seo.  3.  And  he  it  further  enacted.  That,  in  order  to  procure  bullion 
for  the  requisite  coinage  of  the  subdivisions  of  the  dollar  authorized  by 
this  act,  the  treasurer  of  the  Mint  shall,  with  the  approval  of  the  direc- 
tor, purchase  such  bullion  with  the  bullion  fund  of  the  Mint.  .  .  . 

Seo.  4.  And  he  it  further  enacted.  That  such  coins  shall  be  paid  out 
at  the  Mint,  in  exchange  for  gold  coins  at  par,  in  sums  not  less  than  one 
hundred  dollars;  and  it  shall  be  lawful,  also,  to  transmit  parcels  of  the 
same  from  time  to  time  to  the  assistant  treasurers,  depositaries,  and 
other  officers  of  the  United  States,  under  general  regulations  proposed 
by  the  director  of  the  Mint  and  approved  by  the  Secretary  of  the 
Treasury :  Provided,  however,  That  the  amount  coined  into  quarter-dol- 
lars, dimes,  and  half-dimes,  shall  be  regulated  by  the  Secretary  of  the 
Treasury. 

Sec.  5.  And  he  it  further  enacted,  Tliat  no  deposits  for  coinage  into 
the  half-dollar,  quarter-dollar,  dime,  and  half-dime  shall  hereafter  be  re- 
ceived other  than  those  made  by  the  treasurer  of  the  Mint,  as  herein 
authorized,  and  upon  account  of  the  United  States. 

Seo.  6.  And  he  it  further  enacted,  That,  at  the  option  of  the  deposit- 
or, gold  or  silver  may  be  cast  into  bars  or  ingots  of  either  pure  metal  or 
of  standard  fineness,  as  the  owner  may  prefer,  with  a  stamp  upon  the 
same,  designating  its  weight  and  fineness ;  but  no  piece  of  either  gold 
or  silver  shall  be  cast  into  bars  or  ingots  of  a  less  weight  than  ten 
ounces,  except  pieces  of  one  ounce,  of  two  ounces,  of  three  ounces,  and 
of  five  ounces,  all  of  which  pieces  of  less  weight  than  ten  ounces  shall 
be  of  the  standard  fineness,  with  their  weight  and  fineness  stamped 
upon  them ;  but  in  cases  where  the  gold  and  silver  deposited  be  coined 
or  cast  into  bars  or  ingots,  there  shall  be  a  charge  to  the  depositor,  in 
addition  to  the  charge  now  made  for  refining  or  parting  the  metals,  of 
one  half  of  one  per  centum  :  .  .  .  Provided,  however.  That  nothing  con- 
tained in  this  section  shall  be  considered  as  applying  to  the  half-dollar, 
the  quarter-dollar,  the  dime,  and  half-dime. 

Seo.  7.  And  be  it  further  enacted.  That,  from  time  to  time,  there 
shall  be  struck  and  coined  at  the  Mint  of  the  United  States,  and  the 


APPENDIX  m.  231 

branches  thereof,  conformably  in  all  respects  to  law,  and  conformably 
in  all  respects  to  the  standard  of  gold  coins  now  established  by  law,  a 
coin  of  gold  of  the  value  of  three  dollars,  or  units.  .  .  . 

[Approved,  February  21,  1853.     10  Statutes  at  Large,  160.] 

VI.  Febetjart,  1873. — An  Act  revising  and  amending  the  Laws  relative 
to  the  Mints,  Assay-offices,  and  Coinage  of  the  United  States. 

Seo.  14.  That  the  gold  coins  of  the  United  States  shall  be  a  one- 
dollar  piece,  wliich,  at  the  standard  weight  of  twenty-five  and  eight 
tenths  grains,  shall  be  the  unit  of  value;  a  quarter-eagle,  or  two-and-a- 
half-dollar  piece ;  a  three-dollar  piece ;  a  half-eagle,  or  five-dollar  piece ; 
an  eagle,  or  ten-dollar  piece ;  and  a  double-eagle,  or  twenty-dollar 
piece.  And  the  standard  weight  of  the  gold  dollar  shall  be  twenty-five 
and  eight  tenths  grains ;  of  the  quarter-eagle,  or  two-and-a-half-dollar 
piece,  sixty-four  and  a  half  grains ;  of  the  three-dollar  piece,  seventy- 
seven  and  four  tenths  grains  ;  of  the  half-eagle,  or  five-dollar  piece,  one 
hundred  and  twenty-nine  grains ;  of  the  eagle,  or  ten-dollar  piece,  two 
hundred  and  fifty-eight  grains ;  of  the  double-eagle,  or  twenty-dollar 
piece,  five  hundred  and  sixteen  grains ;  which  coins  shall  be  a  legal  ten- 
der in  all  payments  at  their  nominal  value  when  not  below  the  standard 
weight  and  limit  of  tolerance  provided  in  this  act  for  the  single  piece, 
and,  when  reduced  in  weight  below  said  standard  and  tolerance,  shall 
be  a  legal  tender  at  valuation  in  prt)portion  to  their  actual  weight;  and 
any  gold  coin  of  the  United  States,  if  reduced  in  weight  by  natural 
abrasion  not  more  than  one  half  of  one  per  centum  below  the  standard 
weight  prescribed  by  law,  after  a  circulation  of  twenty  years,  as  shown 
by  its  date  of  coinage,  and  at  a  ratable  proportion  for  any  period  less 
than  twenty  years,  shall  be  received  at  their  nominal  value  by  the 
United  States  Treasury  and  its  offices.  .  .  . 

Sec,  15.  That  the  silver  coins  of  the  United  States  shall  be  a  trade 
dollar,  a  half-dollar,  or  fifty-cent  piece,  a  quarter-dollar,  or  twenty-five- 
cent  piece,  a  dime,  or  ten-cent  piece ;  and  the  weight  of  the  trade 
dollar  shall  be  four  hundred  and  twenty  grains  troy;  the  weight  of  the 
half-dollar  shall  be  twelve  grams  (grammes)  and  one  half  of  a  gram 
(gramme) ;  the  quarter-dollar  and  the  dime  shall  be  respectively  one  half 
and  one  fifth  of  the  weight  of  said  half-dollar;  and  said  coins  shall  be  a 
legal  tender  at  their  nominal  value  for  any  amount  not  exceeding  five 
dollars  in  any  one  payment. 

Seo.  17.  That  no  coins,  either  of  gold,  silver,  or  minor  coinage,  shall 
hereafter  be  issued  from  the  Mint  other  than  those  of  the  denomina- 
tions, standards,  and  weights  herein  set  forth. 

Sec.  25.  That  the  charge  for  converting  standard  gold  bullion  into 
coin  shall  be  one  fifth  of  one  per  centum  ;  and  the  charges  for  convert- 


232  APPENDIX  III. 

ing  standard  silver  into  trade  dollars,  for  melting  and  refining  when 
bullion  is  below  standard,  for  toughening  when  metals  are  contained  in 
it  which  render  it  unfit  for  coinage,  for  copper  used  for  alloy  when  the 
bullion  is  above  standard,  for  separating  the  gold  and  silver  when  these 
metals  exist  together  in  the  bullion,  and  for  the  preparation  of  bars, 
shall  be  fixed,  from  time  to  time,  by  the  director,  with  the  concurrence 
of  the  Secretary  of  the  Treasury,  so  as  to  equal  but  not  exceed,  in  their 
judgment,  the  actual  average  cost  to  each  Mint  and  assay-office  of  the 
material,  labor,  wastage,  and  use  of  machinery  employed  in  each  of  the 
cases  aforementioned. 

[Approved,  February  12,  1873.     17  Statutes  at  Large,  424.] 

Note. — By  an  act  approved  March  3,  1875,  the  coinage  of  a  twenty-cent 
piece,  in  conformity  with  the  provisions  made  as  to  other  subsidiary  silver  coins, 
was  authorized.     See  18  Statutes  at  Large,  Part  III,  478. 

VII.  JvNE,1874:.—Iievised  Statutes  of  tTie  United  States  ;  Title  XXXIX, 

Legal  Tender. 

Sec.  3584.  No  foreign  gold  or  silver  coins  shall  be  a  legal  tender  in 
payment  of  debts. 

Sec.  3585.  Tlie  gold  coins  of  the  United  States  shall  be  a  legal  tend- 
er in  all  payments  at  their  nominal  value  when  not  below  the  standard 
weight  and  limit  of  tolerance  provided  by  law  for  the  single  piece,  and, 
when  reduced  in  weight  below  such  standard  and  tolerance,  shall  be  a 
legal  tender  at  valuation  in  proportion  to  their  actual  weight. 

Sec.  3586.  The  silver  coins  of  the  United  States  shall  be  a  legal 
tender  at  their  nominal  value,  for  any  amount  not  exceeding  five  dollars 
in  any  one  payment. 

Sec.  3587.  The  minor  coins  of  the  United  States  shall  be  a  legal 
tender,  at  their  nominal  value,  for  any  amount  not  exceeding  twenty- 
five  cents  in  any  one  payment, 

[Sections  3588,  3589,  3590,  contain  the  provisions  to  be  found  in  previous 
acts,  making  United  States  notes,  demand  notes,  and  Treasury  notes,  respectively, 
legal  tender.] 

[Approved,  June  22,  1874.     Revised  Statutes,  712.] 

VIII.  January,  1875, — An  Act  to  provide  for  the  Resumption  of  Specie 

Payments. 

Be  it  enacted^  .  .  .  That  the  Secretary  of  the  Treasury  is  hereby 
authorized  and  required,  as  rapidly  as  practicable,  to  cause  to  be  coined 
at  the  mints  of  the  United  States,  silver  coins  of  the  denominations  of 
ten,  twenty-five,  and  fifty  cents,  of  standard  value,  and  to  issue  them  in 


APPENDIX  III.  233 

redemption  of  an  equal  number  and  amount  of  fractional  currency  of 
similar  denominations ;  or,  at  his  discretion,  he  may  issue  such  silver 
coins  through  the  mints,  the  sub-treasuries,  public  depositories,  and 
post-offices  of  the  United  States ;  and,  upon  such  issue,  he  is  hereby 
authorized  and  required  to  redeem  an  equal  amount  of  such  fractional 
currency  until  the  whole  amount  of  such  fractional  currency  outstand- 
ing shall  be  redeemed. 

Seo.  2.  That  so  much  of  Section  3524  of  the  Revised  Statutes  of 
the  United  States  as  provides  for  a  charge  of  one  fifth  of  one  per  cen- 
tum for  converting  standard  gold  bullion  into  coin  is  hereby  repealed, 
and  hereafter  no  charge  shall  be  made  for  that  service. 

[Approved,  January  14,  1875.     18  Statutes  at  Large,  Part  III,  296.] 

IX.  Apeil,  1876. — Issue  of  Silver  Coin. 

Seo.  2.  That  the  Secretary  of  the  Treasury  is  hereby  directed  to 
issue  silver  coins  of  the  United  States  of  the  denomination  of  ten,  twen- 
ty, twenty-tive,  and  fifty  cents  of  standard  value,  in  redemption  of  an 
equal  amount  of  fractional  currency,  whether  the  same  be  now  in  the 
Treasury  awaiting  redemption,  or  whenever  it  may  be  presented  for 
redemption ;  and  the  Secretary  of  the  Treasury  may,  under  regulations 
of  the  Treasury  Department,  provide  for  suck  redemption  and  issue  by 
substitution  at  the  regular  sub-treasuries  and  public  depositories  of  the 
United  States  until  the  whole  amount  of  fractional  currency  outstand- 
ing shall  be  redeemed.  And  the  fractional  currency  redeemed  under 
this  act  shall  be  held  to  be  a  part  of  the  sinking-fund  provided  for  by 
existing  law.  .  .  . 

[Approved,  April  17,  1876.] 

X,  July,  1876. — Joint  Resolution  for  the  Issue  of  Silver  Coin. 

Resolved^  That  the  Secretary  of  the  Treasury,  under  sucli  limits  and 
regulations  as  will  best  secure  a  just  and  fair  distribution  of  the  same 
through  the  country,  may  issue  the  silver  coin  at  any  time  in  the  Treas- 
ury to  an  amount  not  exceeding  ten  million  dollars  in  exchange  for  an 
equal  amount  of  legal-tender  notes;  and  the  notes  so  received  in  ex- 
change shall  be  kept  as  a  special  fund  separate  and  apart  from  all  other 
money  in  the  Treasury,  and  be  reissued  only  upon  the  retirement  and 
destruction  of  a  like  sum  of  fractional  currency  received  at  the  Treasury 
in  payment  of  dues  to  the  United  States ;  and  said  fractional  currency, 
when  so  substituted,  sliall  be  destroyed  and  held  as  part  of  the  sinking- 
fund,  as  provided  in  the  act  approved  April  seventeen,  eighteen  hundred 
and  seventy-six. 

Seo.  2.  That  the  trade  doUar  shall  not  hereafter  be  a  legal  tender, 


234  APPENDIX  in. 

and  the  Secretary  of  the  Treasury  is  hereby  authorized  to  limit  from 
time  to  time  the  coinage  thereof  to  such  an  amount  as  he  may  deem 
sufficient  to  meet  the  export  demand  for  the  same. 

Seo.  3.  That,  in  addition  to  the  amount  of  subsidiary  silver  coin  au- 
thorized by  law  to  be  issued  in  redemption  of  the  fractional  currency,  it 
shall  be  lawful  to  manufacture  at  the  several  Mints,  and  issue  through  the 
Treasury  and  its  several  offices,  such  coin  to  an  amount  that,  including 
the  amount  of  subsidiary  silver  coin  and  of  fractional  currency  outstand- 
ing, shall,  in  the  aggregate,  not  exceed,  at  any  time,  fifty  million  dollars. 

[Section  4  authorizes  the  Secretary  of  the  Treasury  to  purchase  bullion  for 
the  purposes  of  this  resolution,  and  requires  any  gain  arising  from  the  coinage 
thereof  to  be  paid  into  the  Treasury.] 

[Approved,  July  22,  1876.     19  Statutes  at  Large,  215.] 

XI.  Febkttaey,  1878. — An  Act  to  authorize  the  coinage  of  the  standard 
Silver  Dollar,  and  to  restore  its  legal-tender  character. 

Be  it  enacted,  That  there  shall  be  coinedj^  at  the  several  Mints  of 
the  United  States,  silver  dollars  of  the  weight  of  four  hundred  and 
twelve  and  a  half  grains  troy  of  standard  silver,  as  provided  in  the  act 
of  January  eighteen,  eighteen  hundred  and  thirty-seven,  on  which  shall 
be  the  devices  and  superscriptions  provided  by  said  act,  which  coins, 
together  with  all  silver  dollars  heretofore  coined  by  the  United  States 
of  like  weight  and  fineness,  shall  be  a  legal  tender,  at  their  nominal 
value,  for  all  debts  and  dues,  public  and  private,  except  where  otherwise 
expressly  stipulated  in  the  contract.  And  the  Secretary  of  the  Treasury 
is  autliorized  and  directed  to  purchase,  from  time  to  time,  silver  bullion, 
at  the  market  price  thereof,  not  less  than  two  million  dollars  worth  per 
month,  nor  more  than  four  million  dollars  worth  per  month,  and  cause 
the  same  to  be  coined  monthly  as  fast  as  so  purchased  into  such  dollars; 
and  a  sum  sufficient  to  carry  out  the  foregoing  provision  is  hereby  ap- 
propriated out  of  any  money  in  the  Treasury  not  otherwise  appropriated. 
And  any  gain  or  seigniorage  arising  from  this  coinage  shall  be  accounted 
for  and  paid  into  the  Treasury,  as  provided  under  existing  laws  relative 
to  the  subsidiary  coinage ;  Provided,  That  the  amount  of  money  at  any 
one  time  invested  in  such  silver  bullion,  exclusive  of  such  resulting  coin, 
shall  not  exceed  five  million  dollars.  And  provided  further,  That  noth- 
ing in  this  act  shall  be  construed  to  authorize  the  payment  in  silver  of 
certificates  of  deposit  issued  under  the  provisions  of  section  two  hundred 
and  fifty-four  of  the  Eevised  Statutes. 

Sec.  2.  That,  immediately  after  the  passage  of  this  act,  the  President 
shall  invite  the  governments  of  the  countries  composing  the  Latin 
Union,  so  called,  and  of  such  other  European  nations  as  he  may  deem 


APPENDIX  III.  235 

advisable,  to  join  the  TJnited  States  in  a  conference  to  adopt  a  common 
ratio  a3  between  gold  and  silver,  for  the  purpose  of  establishing,  inter- 
nationally, the  use  of  bimetallic  money,  and  securing  fixity  of  relative 
value  between  those  metals ;  such  conference  to  be  held  at  such  place, 
in  Europe  or  in  the  United  States,  at  such  time  within  six  months,  as 
may  be  mutually  agreed  upon  by  the  Executives  of  the  governments 
joining  in  the  same,  whenever  the  governments  so  invited,  or  any  three 
of  them,  shall  have  signified  their  willingness  to  unite  in  the  same.  The 
President  shall,  by  and  with  the  advice  and  consent  of  the  Senate,  ap- 
point three  commissioners,  who  shall  attend  such  conference  on  behalf 
of  the  United  States,  and  shall  report  the  doings  thereof  to  the  President, 
who  shall  transmit  the  same  to  Congress.  Said  commissioners  shall 
each  receive  the  sura  of  twenty-five  hundred  dollars  and  their  reasona- 
ble expenses,  to  be  approved  by  the  Secretary  of  State ;  and  the  amount 
necessary  to  pay  such  compensation  and  expenses  is  hereby  appropriated 
out  of  any  money  in  the  Treasury  not  otherw- ise  appropriated. 

Seo.  3.  That  any  holder  of  the  coin  authorized  by  this  act  may  de- 
posit the  same  with  the  Treasurer  or  any  Assistant  Treasurer  of  the 
United  States,  in  sums  not  less  than  ten  dollars,  and  receive  therefor 
certificates  of  not  less  than  ten  dollars  each,  corresponding  with  the  de- 
nominations of  the  United  States  notes.  The  coin  deposited  for  or  repre- 
senting the  certificates  shall  be  retained  in  the  Treasury  for  the  payment 
of  the  same  on  demand.  Said  certificates  shall  be  receivable  for  customs, 
taxes,  and  all  public  dues,  and,  when  so  received,  may  be  reissued. 

Seo.  4.  All  acts  and  parts  of  acts  inconsistent  with  the  provisions  of 
this  act  are  hereby  repealed. 

Note. — The  above  act  having  been  returned  by  the  President  of  the  United 
States,  with  his  objections,  to  the  House  of  Representatives,  February  28,  1878, 
was  passed  by  both  Houses,  and  became  a  law  on  the  same  day. 

XII.  June,  1879. — An  Act  to  authorise  the  redemption  of  Silver  Coins. 

Be  it  enacted,  That  the  holder  of  any  of  the  silver  coins  of  the 
United  States  of  smaller  denominations  than  one  dollar  may,  on  pres- 
entation of  the  same  in  sums  of  twenty  dollars,  or  any  multiple  there- 
of, at  the  office  of  the  Treasurer  or  any  Assistant  Treasurer  of  the  United 
States,  receive  therefor  lawful  money  of  the  United  States. 

Sec.  3.  That  the  present  silver  coins  of  the  United  States  of  smaller 
denominations  than  one  dollar  shall  hereafter  be  a  legal  tender  in  all 
sums  not  exceeding  ten  dollars  in  full  payment  of  all  dues,  public  and 
private. 

[Approved,  June  9,  1879.] 


236  APPENDIX  m. 


B. 

Feench  Monetary  Law  of  1803. 

In  the  name  of  the  Fkench  People, 

Bonaparte,  First  Consul,  Peoclaims  as  law  of  the  Republic  the  fol- 
lowing decree,  rendered  by  the  Corps  Legislatif  the  7  germinal  [28 
March],  year  xi  [1803],  conformably  with  the  proposition  made  by  the 
government  the  19  ventose,  communicated  to  the  tribunal  the  next  day. 

decree. 

General  dispositions. 

Five  grammes  of  silver,  nine  tenths  fine,  constitute  the  monetary 
unit,  which  retains  the  name  of  franc. 

title  I. 
Of  the  fabrication  of  coins. 

Aeticle  1.  The  silver  coins  shall  be  the  quarter-of-a-franc,  half- 
franc,  three-quarters-of-a-franc,  one-franc,  two-franc,  and  five -franc 
pieces. 

Art.  2.  Their  fineness  is  fixed  at  nine  tenths  fine  and  one  tenth  alloy. 

Art.  3.  The  weight  of  the  quarter-of-a-franc  piece  shall  be  one 
gramme  twenty-five  centigrammes. 

That  of  the  half-franc  piece,  two  grammes  five  decigrammes. 

That  of  the  three-quarters-of-a-franc  piece,  three  grammes  seventy- 
five  centigrammes. 

That  of  the  one-franc  piece,  five  grammes. 

That  of  the  two-frano  piece,  ten  grammes. 

That  of  the  five-franc  piece,  twenty  five  grammes. 

Art.  4.  The  tolerance  of  fineness  for  silver  money  shall  be  three 
thousandths,  outside  as  well  as  within. 

Aet.  5.  The  tolerance  of  weight  shall  be,  for  the  quarter-of-a-franc 
piece,  ten  thousandths,  outside  as  well  as  within  ;  for  the  half-franc  and 
three-quarters-of-a-franc  piece,  seven  thousandths,  outside  as  well  as 
within ;  for  the  one-franc  and  two-franc  pieces,  five  thousandths,  out- 
side as  well  as  within  ;  and  for  the  five-franc  piece,  three  thousandths, 
outside  as  well  as  within. 

Art.  6.  There  shall  be  coined  gold  pieces  of  twenty  francs  and  of 
forty  francs. 

Art.  7.  Their  fineness  is  fixed  at  nine  tenths  fine  and  one  tenth 
alloy. 


APPENDIX  III.  237 

Akt.  8.  The  twenty-franc  pieces  shall  he  struck  at  the  rate  of  a 
hundred  and  fifty-five  pieces  to  the  kilogramme,  and  the  forty-franc 
pieces  at  that  of  seventy-seven  and  a  half. 

Aet.  9.  The  tolerance  of  fineness  of  the  gold  coins  is  fixed  at  two 
thousandths  outside,  the  same  within. 

Aet.  10.  The  tolerance  of  weight  is  fixed  at  two  thousandths  out- 
side, the  same  within. 

Aet.  11.  The  expense  of  coinage  alone  can  he  required  of  those  who 
shall  bring  material  of  gold  or  silver  to  the  Mint. 

These  charges  are  fixed  at  nine  francs  per  kilogramme  of  gold,  and 
at  three  francs  per  kilogramme  of  silver. 

Aet.  12.  When  the  material  shall  be  below  the  monetary  standard, 
it  shall  bear  the  charges  of  refining  or  of  separation. 

The  amount  of  these  charges  shall  be  calculated  on  the  portion  of 
the  said  material  which  must  be  purified  in  order  to  raise  the  whole  to 
the  monetary  standard. 

Aet.  13.  There  shall  be  coined  pieces  of  pure  copper  of  two  hun- 
dredths, three  hundredths,  and  five  hundredths  of  a  franc. 

Aet.  14.  The  weight  of  the  pieces  of  two  hundredths  shall  be  four 
grammes ;  that  of  the  pieces  of  three  hundredths,  six  grammes  ;  that  of 
the  pieces  of  five  hundredths,  ten  grammes. 

Aet.  15.  The  tolerance  of  weight  shall  be  for  the  copper  pieces  a 
fiftieth  outside. 

[Aet.  16  explains  the  devices.] 

Aet.  17.  The  diameter  of  each  piece  shall  be  determined  by  regula- 
tions of  the  public  administration. 

[Title  II  deals  only  with  the  verification  of  the  coins."] 

At  Paris,  the  11  germinal  [April  7],  year  xi  of  the  Republic  [1803], 

[Signed.] 


c. 

Geeman  Monetary  Laws  of  1871  akd  1873. 

German  Eeichstag,  1st  Legislation  Period,  2d  session,  1871.  Law  re- 
lating to  the  coinage  of  imperial  gold  coins,  as  passed  by  Parliament 
after  its  third  reading. 

"We,  "WiLHELM,  by  the  grace  of  God,  German  Emperor,  King  of 
Prussia,  etc.,  do  ordain,  in  the  name  of  the  German  Empire,  the  same 
having  been  passed  by  the  Bundesrath  and  the  Reichstag  as  follows : 

Seo.  1.  There  shall  be  coined  an  imperial  gold  coin,  139^  pieces 
of  which  shall  contain  one  pound  of  pure  gold. 

ir 


238  APPENDIX  III. 

Seo.  3.  The  tenth  of  this  gold  coin  shall  he  called  "  mark,"  and  shall 
he  divided  into  one  hundred  "pfennige." 

Seo.  3.  Besides  the  imperial  gold  coin  of  10  marks  (Sec.  1),  there 
shall  be  coined  imperial  gold  coins  of  20  marks,  of  which  69f  pieces 
shall  contain  one  pound  of  pure  gold. 

Sec.  4.  The  alloy  of  the  imperial  gold  coins  shall  consist  of  900 
thousandths  parts  gold,  and  100  thousandths  parts  copper.  Therefore, 
125-55  pieces  of  10  marks,  62"775  pieces  of  20  marks,  will  each  weigh 
one  pound. 

Seo.  5.  The  imperial  gold  coins  are  to  bear  on  one  side  the  imperial 
eagle,  with  the  inscription  "  German  Empire,"  and  their  value  in  marks; 
also  the  year  of  their  coinage ;  on  the  other  side  the  likeness  of  the 
sovereign,  or,  in  the  case  of  the  free  cities,  their  arms,  with  a  corre- 
sponding inscription  and  the  marks  of  the  Mint.  Diameters  of  coins, 
form,  and  inscription  of  edges  of  the  same  shall  be  prescribed  by  the 
Bundesrath. 

Seo.  6.  Until  the  enactment  of  a  law  for  the  redemption  of  the  large 
silver  coins,  the  making  of  the  gold  coins  shall  be  conducted  at  the  ex- 
pense of  the  Empire,  for  all  the  states  of  the  Confederation,  at  the  mints 
of  those  states  which  have  declared  their  readiness  to  do  so. 

The  Chancellor  of  the  Empire  shall  determine,  with  the  consent  of 
the  Bundesrath,  the  amounts  to  be  coined  in  gold,  the  apportionment  of 
these  amounts  to  the  several  kinds  of  coins  and  to  the  several  mints, 
and  the  compensation  to  be  paid  in  equal  proportions  to  the  several  mints 
for  the  coinage  of  each  separate  kind  of  coin.  He  shall  deliver  to  the  sev- 
eral mints  the  gold  requisite  to  the  amounts  of  coinage  assigned  them. 

Sec  7.  The  process  of  coinage  of  the  imperial  gold  coins  will  be  de- 
termined by  the  Bundesrath,  and  is  subject  to  the  control  of  the  Empire. 
This  process  shall  assure  the  absolute  accuracy  of  the  coins  in  fineness 
and  weight.  So  far  as  an  absolute  accuracy  in  each  single  piece  can 
not  be  secured,  the  deviation  in  weight  shall  not  be  greater,  either 
above  or  below,  than  two  and  one  half  thousandths;  in  fineness  not 
more  than  two  thousandths. 

Seo.  8.  All  payments  which  are  by  law  to  be  made,  or  which  may 
be  made,  in  silver  coins  of  the  thaler  system,  of  the  South  German  sys- 
tem, of  the  Lubeck  or  Hamburg  current  system,  or  in  gold  thalers  of 
the  Bremen  system,  can  be  made  in  imperial  gold  coins  (Sees.  1  and  3) 
in  such  manner  as  to  count  the  10-mark  piece  equal  in  value  to  8^ 
thalers,  or  5  florins  50  kreutzers,  South  German  system,  8  marks  5-J- 
schillings  Lubeck  or  Hamburg  current  system,  3^  gold  thalers  of  the 
Bremen  system ;  the  20-mark  piece  equal  in  value  to  6f  thalers,  or  11 
florins  40  kreutzers,  South  German  system ;  16  marks  lOf  schillings, 
Lubeck  or  Hamburg  current  system ;  6/y  gold  thalers  of  the  Bremen 
system. 


APPENDIX  in.  239 

Seo.  9.  Imperial  gold  coin  whose  weight  shall  be  not  more  than  five 
thousandths  parts  below  their  normal  weight  (Sec.  4),  current  weight, 
and  whose  weight  shall  not  have  been  reduced  by  violent  or  unlawful 
injury,  shall  be  counted  as  of  fuU  weight  for  all  payments.  Imperial 
gold  coins  which  are  of  less  than  the  above-named  current  weight,  and 
which  have  been  accepted  in  payment  by  imperial,  state,  provincial,  or 
municipal  treasuries,  or  by  money  and  credit  institutions  and  banks, 
shall  not  be  paid  out  again  by  such  treasuries  or  institutions. 

The  imperial  gold  coins  will  be  taken  in  for  remelting  by  and  for  the 
account  of  the  Empire  after  they  have  lost  so  mach  of  their  weight  by 
long  circulation  and  wear  as  to  be  of  less  than  the  current  weight. 

All  such  worn  gold  coins  shall  always  be  accepted  by  aU  treasuries 
of  the  Empire  and  of  the  states  at  the  value  at  which  they  were  emitted. 

Sec.  10.  No  coinage  of  gold  coins  other  than  those  established  by 
this  law,  nor  of  large  silver  coins,  the  coinage  of  metals  excepted,  shall 
take  place  until  further  action. 

Sec.  11.  The  gold  coins  of  the  states  of  the  German  Confederation 
at  present  in  circulation  are  to  be  redeemed  by  order  and  for  account 
of  the  Empire  in  proportion  to  the  issue  of  the  new  gold  coins  (Sec.  6). 

The  Chancellor  of  the  Empire  is  authorized  to  provide,  in  like  man- 
ner, for  the  redemption  of  the  hitherto-made  large  silver  coins  of  the 
states  of  the  German  Confederation,  and  to  take  from  the  most  available 
funds  of  the  imperial  treasury  the  means  necessary  therefor.  Concern- 
ing the  execution  of  the  above  regulations,  an  annual  account  shall  be 
given  to  the  Reichstag  at  its  first  regular  session. 

Sec.  12.  Pieces  of  standard  weight  may  be  made  for  adjustment  and 
sealing  which  shall  represent  the  normal  weight  and  the  current  weight 
of  the  gold  coins  to  be  made  according  to  this  law  ;  also  multiples  of 
those  standard  pieces.  The  regulations  given  in  Sections  10  and  18  of 
the  act  dated  August  17,  1868,  relating  to  weights  and  measures 
("  Bundesgesetzblatt,"  p.  473),  shall  be  binding  for  the  adjustment  and 
sealing  of  such  standard  pieces. 

Seo.  13.  In  the  territory  of  the  Kingdom  of  Bavaria  the  pfennig 
may,  if  necessary,  be  divided  into  two  half-pfennigs. 

Berlin,  November  23,  1871.  The  President  of  the  German  Impe- 
rial Diet,  represented  by 

Prince  von  HonENXonE  Sohillengsfijest. 

(Extract  from  the  "  Journal  of  National  Laws,"  1S73.    Pnblished  in  Berlin,  July  15, 1S73.) 

'■^Journal  of  National  Laws^^''  No.  22.— No.  953,  Mird  Law  of  July  9,  1873. 

"We,  Wilhelm,  by  the  grace  of  God,  German  Emperor,  King  of  Prus- 
sia, etc.,  do  decree,  in  the  name  of  the  German  Empire  and  the  Parlia- 
ment, as  follows : 


240  APPENDIX  III. 

Article  1.  In  place  of  the  various  local  standards  now  current  in  Ger- 
many, a  national  gold  standard  will  be  established.  Its  monetary  unit 
is  the  "mark,"  as  established  in  paragraph  2  of  the  law  dated  December 
4,  1871,  in  regard  to  the  issue  of  national  gold  coins.  (See  "Journal  of 
National  Laws"  for  1871,  p.  404.) 

The  date  when  the  national  standard  shall  be  enforced  within  the 
entire  territory  of  the  Empire  will  be  determined  by  an  imperial  decree, 
to  be  published  with  the  consent  of  the  Federal  Council,  and  proclaimed 
at  least  three  months  in  advance  of  that  date.  The  state  governments 
are  authorized  to  introduce  the  national  "  mark  "  standard,  even  before 
that  date,  by  special  decree. 

Aet.  2.  In  addition  to  the  national  gold  coins  designated  in  the  law 
of  December  4,  1871,  there  will  also  be  issued  national  gold  coins  of  five 
marks,  279  pieces  to  be  coined  from  each  pound  of  fine  gold.  The  regu- 
lations of  paragraphs  4,  5,  7,  8,  and  9  of  that  law  also  apply  in  regard 
to  these  coins,  with  the  provision,  however,  that  the  allowance  in 
weight  (paragraph  7)  above  or  below  the  standard  may  be  four  thou- 
sandths, and  the  diiference  between  the  standard  and  current  weight 
may  be  eight  thousandths  for  these  coins. 

Art.  3.  There  shall  also  be  issued  in  addition  to  the  national  gold 
coins : 

1.  As  silver  coins,  five-mark  pieces,  two-mark  pieces,  one-mark 
pieces,  fifty-pfennig  pieces,  and  twenty-pfennig  pieces. 

2.  As  nickel  coins,  ten-pfennig  pieces,  and  five-pfennig  pieces. 

3.  As  copper  coins,  two-pfennig  and  one-pfennig  pieces,  in  accord- 
ance with  the  following  regulations  : 

IT  1.  The  pound  of  fine  silver  shall  produce  at  coinage  twenty  five- 
mark  pieces,  fifty  two-mark  pieces,  one  hundred  one-mark  pieces,  two 
hundred  fifty-pfennig  pieces,  five  hundred  twenty-pfennig  pieces.  The 
proportion  of  alloy  is  one  hundred  parts  of  copper  to  nine  hundred  parts 
of  silver,  so  that  ninety  marks  in  silver  coin  shall  weigh  one  pound. 
The  process  of  the  manufacture  of  these  coins  will  be  established  by  the 
Federal  Council.  In  single  coins  the  allowance  in  fineness  above  or 
below  the  standard  shall  not  be  more  than  three  thousandths,  and  in 
weight,  the  twenty-pfennig  pieces  excepted,  not  more  than  ten  thou- 
sandths. In  quantities,  however,  the  standard  weight  and  fineness  must 
be  observed  in  silver  coins. 

IT  2.  The  silver  coins  of  more  than  one  mark  bear  upon  one  side  the 
national  eagle,  with  the  inscription  "  Deutsches  Reich  "  (German  Em- 
pire), and  the  designation  of  the  value  in  marks,  as  well  as  the  year  of 
coinage  ;  upon  the  other  side  the  image  of  the  sovereign,  or,  respectively, 
the  escutcheon  of  the  free  cities,  with  a  suitable  inscription  and  the  cipher 
of  the  Mint.  The  diameter  of  these  coins,  as  well  as  the  nature  and 
milling  of  their  edges,  will  be  determined  by  the  Federal  Council. 


APPENDIX  III.  241 

T[  3.  Other  silver  coins,  also  the  nickel  and  copper  coins,  bear  upon 
one  side  the  value,  the  year,  and  the  inscription  "  Deutsches  Reich  " 
(German  Empire),  and  upon  the  other  side  the  national  eagle  and  the 
cipher  of  the  Mint.  Particular  regulations  concerning  composition, 
weight,  and  diameter  of  these  coins,  as  well  as  the  ornamentation  of 
the  face  bearing  the  inscription,  and  the  condition  of  the  edges,  will  be 
established  by  the  Federal  Council. 

1[  4.  Silver,  nickel,  and  copper  coins  will  be  manufactured  in  the  mints 
of  such  Federal  states  as  desire  it.  The  coinage  and  the  emission  of 
these  coins,  however,  will  be  subject  to  the  direction  of  the  Empire. 
The  national  Chancellor  will  designate,  with  the  consent  of  the  Federal 
Council,  the  aggregate  of  the  issues,  the  distribution  of  these  amounts 
among  the  different  denominations  of  coin  and  the  various  mints ;  and 
the  compensation  of  these  mints  for  the  coinage  of  every  species  of  coin 
will  be  ordered  by  the  national  Chancellor. 

Aet.  4.  The  aggregate  issue  of  silver  coins  shall,  until  further  orders, 
not  exceed  ten  marks  for  each  inhabitant  of  the  Empire.  At  each  issue 
of  these  coins  a  quantity  of  the  present  silver  coins  equal  in  value  to 
the  new  issue  must  be  withdrawn  from  circulation,  and  first  those  of 
"  thirty-thaler"  standard.  Their  value  is  to  be  calciilated  according  to 
the  regulations  in  paragraph  2,  Article  14. 

Art.  5.  The  aggregate  issue  of  nickel  and  copper  coins  shall  not 
exceed  two  and  a  half  marks  for  each  inhabitant. 

Aet.  6.  Of  the  fractional  coins  there  are  to  be  withdrawn  before  the 
introduction  of  the  national  standard — 

1.  The  five-pfennig,  two-pfennig,  and  one-pfennig  pieces,  coined  after 
the  mark  system  in  Mecklenburg,  and  the  coins  of  the  thaler  standard, 
except  the  Bavarian  "  hellers  "  (farthings). 

2.  The  fractional  coins  of  two-pfennig  and  four-pfennig  pieces,  based 
upon  the  duodecimal  division  of  the  "  groschen." 

3.  The  fractional  coins  of  the  thaler  standard,  based  upon  any  other 
division  of  the  thaler  less  than  thirty  groschen,  with  the  exception  of 
the  pieces  having  the  value  of  the  half-thaler.  After  that  date  no  per- 
son shall  be  compelled  to  take  these  pieces  in  payment,  except  the  de- 
positories designated  for  their  redemption. 

Aet.  Y.  The  coinage  of  silver,  nickel,  and  copper  coins,  as  well  as 
the  withdrawal  of  the  current  silver  coins  and  fractional  coins,  to  be 
ordered  by  the  national  Chancellor,  will  be  defrayed  by  the  national 
treasury. 

Aet.  8.  The  regulation  for  the  withdrawal  of  local  coins,  and  the 
decrees  required  therefor,  will  be  issued  by  the  Federal  Council.  The 
publication  of  these  measures  must  be  made  in  the  "  Journal  of  the 
National  Laws,"  in  addition  to  the  publication  of  the  local  ordinances. 
Such  withdrawal  can  only  be  ordered  after  fixing  a  period  of  redemp- 


242  APPENDIX   III. 

tion  of  at  least  four  weeks,  and  the  publication  of  its  termination  at 
least  three  months  in  advance  of  the  same. 

Aet.  9.  No  person  shall  be  compelled  to  take  in  payment  national 
silver  coins  to  a  larger  amount  than  twenty  marks,  and  nickel  and  cop- 
per coins  to  a  larger  amount  than  one  mark.  The  Federal  Council  will 
designate  such  depositories  as  will  disburse  national  gold  coins  in  ex- 
change for  silver  coins  in  amounts  of  at  least  200  marks,  and  of  nickel 
and  copper  coins  in  amounts  of  at  least  50  marks,  upon  demand.  The 
same  authority  will  also  establish  particular  rules  of  exchange. 

Art.  10.  The  provisions  for  acceptance  and  exchange  (Article  9)  do 
not  apply  to  perforated  coins,  or  counterfeits,  or  such  as  may  be  reduced 
in  weight  by  other  causes  than  abrasure  in  usage.  National  silver, 
nickel,  and  copper  coins,  which,  by  long  circulation  or  use,  have  lost 
considerably  in  weight  or  imprint,  will  be  received  in  national  and  local 
depositories,  but  must  be  withdrawn  at  the  expense  of  the  Empire. 

Art.  11.  The  coinage  of  other  silver,  nickel,  or  copper  coins  than 
those  authorized  by  this  law  is  strictly  prohibited.  The  provision  in 
paragraph  10  of  the  law  of  December  4,  1871,  concerning  the  coinage 
of  national  gold  coins  ("  Journal  of  National  Laws  of  1871,"  p.  404), 
reserving  the  authority  of  coining  silver  coins  as  medals,  will  expire  De- 
cember 31,  1873. 

Aet.  12.  The  coinage  of  the  national  gold  coins  will  continue  to  be 
executed  according  to  the  rules  in  paragraph  6  of  the  law  of  December 
4,  1871,  providing  for  the  coinage  of  national  gold  coins.  (See  "Jour- 
nal of  National  Laws  of  1871,"  p.  404.) 

Private  persons  are  privileged  to  have  twenty -mark  pieces  coined  at 
their  own  expense,  in  mints  which  have  declared  themselves  ready  to 
coin  at  the  expense  of  the  Empire,  when  they  are  not  engaged  in  work 
for  the  Empire. 

The  rate  of  such  coinage  will  be  fixed  by  the  national  Chancellor, 
with  the  consent  of  the  Federal  Council,  but  can  not  exceed  seven  marks 
for  each  pound  of  fine  gold.  The  diiference  between  this  rate  and  the 
compensation  due  the  Mint  for  such  coinage  shall  be  paid  into  the 
national  treasury,  and  must  be  alike  in  all  mints.  The  mints  are  not 
allowed  to  charge  higher  rates  for  private  coinage  than  the  national 
treasury  pays  for  the  coinage  of  twenty-mark  pieces. 

Aet.  13.  The  Federal  Council  is  authorized: 

1.  To  determine  the  value  to  which  foreign  gold  and  silver  coins  are 
limited,  to  be  offered  or  received  in  payment,  and  also  to  prohibit  the 
circulation  of  foreign  coins  entirely,  if  it  is  deemed  advisable. 

2.  To  determine  whether  or  not  foreign  coins  may  be  admitted  in 
national  and  local  depositories  at  a  publicly  known  value,  and,  if  ad- 
mitted, what  this  value  is  to  be.  Habitual  or  professional  transgres- 
sions of  the  regulations  established  by  the  Federal  Council,  in  accord- 


APPENDIX  III.  243 

ance  with  paragraph  1  of  this  article,  will  be  punished  by  a  fine  of  150 
marks  and  imprisonment  for  six  weeks. 

Art.  14.  From  the  introduction  of  the  national  standard  the  follow- 
ing rules  will  be  enforced: 

IF  1.  All  payments  to  be  made  up  to  that  time  in  coins  now  cur- 
rent, or  in  foreign  coins  lawfully  equalized  with  such  domestic  coins, 
are  then  to  be  made  in  national  coins  under  reservation  of  Articles  9, 
15,  and  16. 

1  2.  The  calculations  of  such  gold  coins  as  are  not  provided  for  by 
an  established  relation  to  silver  coins  are  to  be  made  in  accordance  with 
their  proportion  of  lawful  fineness,  for  which  their  obligation  calls,  to 
the  legal  fineness  of  national  gold  coins. 

In  the  calculation  of  other  coins  the  thaler  is  valued  at  3  marks,  the 
florin  (golden)  of  South  Germany  at  If  marks,  and  the  mark  of  Lubeck 
or  Hamburg  standard  at  1^  marks.  Other  coins  of  the  same  standard 
are  to  be  valued  in  their  proportion  to  said  values.  In  these  calculations 
the  fractions  of  pfennigs  of  the  national  standard  are  to  be  counted  as 
pfennigs  if  equal  to,  or  over,  half  a  pfennig ;  smaller  fractions  are  to  be 
ignored. 

IT  3.  Obligations  entered  into  after  the  introduction  of  the  national 
standard,  based  upon  former  standards  of  money  or  accounts,  shall  be 
liquidated  in  national  coins,  under  the  regulations  of  paragraph  2,  with 
reservation  of  the  provisions  in  Articles  9,  15,  and  16. 

IT  4.  In  all  documents  executed  by  courts  or  notaries  involving  con- 
siderations of  money,  also  in  all  court  decisions  involving  fines,  the 
amounts  must  be  expressed  in  the  national  standard,  if  there  is  any 
proportion  thereof  to  the  national  standard  as  legally  established ;  yet 
additional  desiignation  under  the  standard  which  the  obligation  origi- 
nated is  also  permitted. 

Art.  15.  In  the  place  of  national  coins  in  all  payments  previous  to 
the  contemplated  withdrawal  there  will  be  admitted: 

1.  Within  the  entire  territory  of  the  Empire,  pieces  of  one  and  two 
thalers  of  German  coinage,  at  a  value  of  three  marks  to  one  thaler,  in 
lieu  of  all  national  coins. 

2.  Within  the  entire  territory  of  the  Empire,  in  place  of  national  sil- 
ver coin  only,  current  silver  pieces  of  German  coinage  of  ^  and  ^  thaler 
at  a  value  of  ^  thaler  to  1  mark  and  \  thaler  to  i  mark. 

3.  In  all  states  where  the  thaler  standard  now  prevails  in  place  of 
the  national  nickel  and  copper  coins,  the  following  coins  of  the  thaler 
standard  at  the  designated  values:  -^V-thaler  pieces  at  the  value  of  25 
pfennigs  ;  ^thaler  pieces  at  the  value  of  20  pfennigs;  -gJo-thaler  pieces 
at  the  value  of  10  pfennigs;  -J-groschen  pieces  at  the  value  of  5  pfen- 
nigs ;  ^-groschen  pieces  at  the  value  of  2  pfennigs  ;  ^-  and  ^j^-groschen 
pieces  at  the  value  of  1  pfennig. 


244:  APPENDIX  m. 

4.  In  those  states  where  the  duodecimal  division  of  the  groschen 
exists  in  place  of  the  national  nickel  and  copper  coins,  the  three-pfennig 
pieces  based  upon  the  duodecimal  division  of  the  groschen  at  a  value 
of  2^  pfennigs. 

5.  In  Bavaria,  in  place  of  the  national  copper  coins,  the  (heller) 
farthing  pieces,  at  the  value  of  ^  pfennig. 

6.  In  Mecklenburg,  in  place  of  the  national  copper  coins,  the  five- 
pfennig,  two-pfennig,  and  one-pfennig  pieces  coined  under  the  mark 
standard,  at  a  value  of  5,  2,  and  3  pfennig.  AH  coins  embraced  under 
paragraphs  3  and  4  of  this  article  are  to  be  admitted  in  payment  at  all 
public  depositories  within  the  Federal  territory  at  the  stated  values 
until  their  withdrawal. 

Aet.  16.  German  gold  crowns,  state  gold  coins,  and  foreign  gold  coins, 
placed  by  law  on  equal  footing  with  domestic  (German)  coins,  as  well 
as  large  silver  coins  of  another  standard  than  that  of  the  thaler,  are  to 
be  admitted  in  payment  until  their  withdrawal  in  the  same  manner  as 
they  have  been  accepted  hitherto  under  previous  regulations. 

Aet.  17.  Even  before  the  introduction  of  the  national  standard  all 
payments  which  may  be  made  under  the  present  laws  in  coins  of  do- 
mestic (German)  standard,  or  in  foreign  coins  placed  by  law  on  an 
equal  footing  with  them,  may  be  liquidated  either  in  part  or  the  total 
in  national  coins,  reserving  the  provisions  in  Article  9  in  such  a  man- 
ner that  their  value  is  calculated  according  to  the  provisions  of  para- 
graph 2,  Article  14. 

Aet.  18.  By  January  1,  1876,  all  bank-notes  not  issued  according 
to  the  national  standard  must  be  withdrawn. 

From  that  date  only  bank-notes  issued  according  to  the  national 
standard,  and  in  amounts  of  not  less  than  100  marks,  may  be  emitted 
and  kept  in  circulation.  These  provisions  also  apply  to  bills  hitherto 
issued  by  corporations. 

All  paper  money  issued  by  single  states  of  the  Confederation  must 
be  withdrawn  before  January  1,  1876,  and  is  to  be  recalled  at  least  six 
months  before  that  date.  In  lieu  thereof  an  emission  of  national  paper 
money  will  be  made  according  to  a  national  law  to  be  issued  in  the 
mean  time.  This  national  law  will  establish  provisions  concerning  the 
emission  and  circulation  of  national  paper  money,  as  well  as  the  facili- 
ties to  be  granted  to  the  single  states  of  the  Confederation  for  the  pur- 
pose of  the  withdrawal  of  their  paper  money. 

In  witness  whereof,  our  signature  and  imperial  seal, 

[l.  8.]  WiLHELM. 

Count  v.  Bismarck. 
Given. at JEms,  July  9,  1873. 


APPENDIX  ni.  245 


D. 

Treaty  between  Switzerland,  Belgium,   France,  and  Italy  con- 
cerning THE  Monetary  Union. 

The  Swiss  Confederation,  H.  M.  the  King  of  Belgium,  H.  M.  the 
French  Emperor,  and  H.  M.  the  King  of  Italy,  equally  animated  by  a 
desire  to  establish  a  more  complete  harmony  between  their  monetary 
enactments,  to  remedy  the  inconveniences  in  regard  to  intercourse  and 
transactions  between  the  inhabitants  of  their  respective  states,  which 
result  from  the  difference  of  standard  of  their  subsidiary  silver  money, 
and  to  contribute,  by  forming  a  monetary  union  between  them,  to  the 
progress  of  a  uniformity  of  weights,  of  measures,  and  of  money,  have 
resolved  to  conclude  an  agreement  to  this  end,  and  have  named  the 
following  as  their  commissioners  plenipotentiary : 

The  Swiss  Confederation :  M.  Kern,  Envoy  Extraordinary,  and  M. 
Feer-Herzog,  member  of  the  Swiss  National  Council. 

The  King  of  the  Belgians:  M.  Frederic  Fortamps,  member  of  the 
Senate,  director  of  the  Bank  of  Belgium,  and  M.  A.  Kreglinger,  Govern- 
ment Commissioner  of  the  National  Bank. 

The  Emperor  of  the  French :  M.  de  Parieu,  Vice-President  of  the 
Council  of  State,  and  M.  Th^ophile-Jules  Pelouze,  President  of  the 
Money  Commission. 

The  King  of  Italy :  M.  Isaac  Artom,  Counselor  of  his  Legation  at 
Paris,  and  M.  Valentin  Protolongo,  Director,  Chief  of  Division,  in  the 
Ministry  of  Agriculture,  Industry,  and  Commerce. 

"Who,  having  communicated  respectively  their  full  powers,  found  in 
good  and  due  form,  have  agreed  upon  the  following  articles : 

Art.  1.  Switzerland,  Belgium,  France,  and  Italy  are  formed  into  a 
union  so  far  as  regards  the  weight,  fineness,  diameter,  and  circulation  of 
their  gold  and  silver  coinage. 

No  change,  for  the  present,  is  made  in  legislation  relative  to  the 
copper  coinage  of  each  of  the  four  states. 

Art.  2.  The  high  contracting  parties  agree  not  to  make,  nor  permit 
to  be  made,  with  their  stamp,  any  gold  coins  of  other  kinds  than  pieces 
of  100  fr.,  50  fr.,  20  fr.,  10  fr.,  and  5  fr.,  determined  as  to  weight,  fine- 
ness, tolerance,  and  diameter,  as  follows : 

Diameter, 
85  millim. 
28      " 
21       " 
19      " 
11      " 


Pieces. 

Weight. 

Tolerance. 

Fineness. 

Tolerance  of 
Fineness. 

100 

32  gr.  258-06 

1  millifem. 

50 

16  "    120-03 

1       " 

20 

6  "    451-71 

2      " 

900  milliem. 

2  milliem. 

10 

2  "    225-80 

2      " 

5 

1  "    612-90 

3      " 

246  APPENDIX  III. 

They  will  admit  without  distinction  at  their  public  treasuries  gold 
coins  made  under  the  foregoing  conditions,  in  one  or  any  of  the  four 
states,  with  the  reservation,  however,  that  they  exclude  pieces  whose 
weight  may  have  been  reduced  by  wear  one  half  per  cent  below  the 
tolerance  stated  above,  or  whose  device  may  have  disappeared. 

Akt.  3.  The  contracting  governments  pledge  themselves  not  to  coin, 
nor  permit  to  be  coined,  silver  five-franc  pieces  except  of  a  weight, 
fineness,  tolerance,  and  diameter  determined  herewith : 

Weight,  Tolerance.  Fineness.  ^ineness!^  Diameter. 

25  gram.     3  milli^mes.     900  milliemes.    2  milliemes.   31  millimetres. 

They  will  reciprocally  receive  the  aforesaid  pieces  in  their  public 
treasuries,  with  the  reservation,  however,  that  they  exclude  those  whose 
weight  may  have  been  reduced  by  wear  one  per  cent  below  the  toler- 
ance stated  above,  or  whose  device  may  have  disappeared. 

Art.  4.  The  high  contracting  parties  will  not  coin  hereafter  silver 
pieces  of  two  francs,  one  franc,  fifty  centimes,  and  twenty  centimes,  ex- 
cept under  the  conditions  of  weight,  fineness,  tolerance,  and  diameter 
determined  herewith : 


Pieces. 

Weight. 

Tolerance. 

Fineness. 

2fr. 

10  gram. 

5  milliem. 

835  milliem, 

1  " 

5       " 

5       " 

835      " 

0-50 

2-50  " 

7       " 

835      " 

0-20 

1       " 

10       " 

835      " 

Tolerance  of 
Fineness. 


Diameter. 
3  milliem.  27  millim. 
3      "  23       " 

3      "  18       « 

3      "  16       " 

These  pieces  must  be  recoined  by  the  governments  that  have  issued 
them  when  they  may  have  been  reduced  by  wear  five  per  cent  below 
the  tolerance  above  stated,  or  when  their  devices  have  disappeared. 

Art.  5.  Silver  pieces  of  two  francs,  one  franc,  fifty  centimes,  and 
twenty  centimes,  coined  on  different  terms  than  those  stated  in  the  pre- 
ceding article,  are  to  be  retired  from  circulation  before  January  1, 1869. 
This  term  is  extended  to  January  1,  1878,  for  pieces  of  two  francs  and 
one  franc  issued  by  Switzerland  by  virtue  of  the  law  of  January  31, 
1860. 

Art.  6.  Silver  pieces  coined  under  the  conditions  of  Article  4  shall 
be  a  legal  tender  between  individuals  of  the  state  which  coined  them  to 
the  amount  of  fifty  francs  at  each  payment. 

The  state  issuing  them  shall  receive  them  from  its  inhabitants  with- 
out limitation  of  quantity. 

Art.  7.  The  public  treasuries  of  each  of  the  four  countries  shall  ac- 
cept the  silver  money  coined  by  any  one  of  the  other  contracting  states, 
conformably  to  Article  4,  to  the  amount  of  one  hundred  francs  at  each 
payment  to  the  aforesaid  treasuries. 

The  governments  of  Belgium,  France,  and  Italy  will  receive,  on  the 


APPENDIX  III.  247 

same  terms,  untilJanuary  1,  1878,  the  Swiss  coins  of  two  francs  and  one 
franc  issued  according  to  the  law  of  January  31,  1860,  which  are  re- 
garded in  every  respect,  during  the  same  period,  as  the  pieces  coined 
under  the  provisions  of  Article  4. 

The  whole  subject  to  the  reservations  stated  in  Article  4  in  regard  to 
wear. 

Art.  8.  Each  of  the  contracting  governments  binds  itself  to  accept 
from  individuals  or  public  treasuries  of  the  other  states  the  subsidiary 
silver  which  it  has  issued,  and  to  give  in  exchange  an  equal  value  of 
current  coin  (gold  coins,  or  five-franc  silver  coins,  provided  the  sum 
presented  for  exchange  shall  not  be  less  than  one  hundred  francs).  This 
obligation  shall  extend  two  years  from  the  expiration  of  the  present 
treaty. 

Aet.  9.  The  high  contracting  parties  shall  issue  silver  pieces  of  two 
francs,  one  franc,  fifty  centimes,  and  twenty  centimes,  coined  under  the 
conditions  stated  in  Article  4,  to  an  amount  only  of  six  francs  to  each 
inhabitant. 

This  amount,  based  on  the  last  census  taken  in  each  state,  and  the 
probable  increase  of  population  to  the  expiration  of  the  present  treaty, 
is  fixed  at : 

For  Belgium 32,000,000  francs. 

"    France 239,000,000      " 

"    Italy 141,000,000      " 

"    Switzerland 17,000,000      " 

Of  the  sums  which  the  governments  also  have  a  right  to  coin  are  in- 
cluded the  following :  The  amounts,  already  issued  by  France  in  accord- 
ance with  the  law  of  May  25,  1864,  of  pieces  of  fifty  and  twenty  cen- 
times to  about  sixteen  millions ;  by  Italy,  in  accordance  with  the  law  of 
August  24, 1862,  of  pieces  of  two  francs  and  one  franc,  and  of  fifty  and 
twenty  centimes,  to  about  one  hundred  millions;  by  Switzerland,  in  ac- 
cordance with  the  law  of  January  31, 1860,  of  two-  and  one-franc  pieces, 
to  about  ten  millions  five  hundred  thousand  francs. 

Aet.  10.  The  date  of  coinage  shall  hereafter  be  stamped  on  the  gold 
and  silver  pieces  coined  in  the  four  states. 

Aet.  11.  The  contracting  governments  shall  state  annually  the 
amount  of  their  issues  of  gold  and  silver  coins,  the  progress  of  the 
withdrawal  and  recoinage  of  their  old  coins,  all  the  arrangements,  and 
all  the  administrative  documents  relative  to  coinage. 

They  shall  likewise  give  information  as  to  all  facts  affecting  the 
reciprocal  circulation  of  their  gold  and  silver  pieces. 

Art.  12.  The  privilege  of  joining  the  present  convention  is  granted 
to  any  other  state  which  shall  accept  its  obligations,  and  which  shall 
adopt  the  monetary  system  of  the  Union  in  regard  to  gold  and  sUver  coins. 


248  APPENDIX  III. 

Art.  13.  The  execution  of  the  reciprocal  pledgres  in  the  present  con- 
vention is  relegated,  so  far  as  necessary,  to  the  fulfillment  of  the  formali- 
ties and  rules  established  by  the  constitutional  laws  of  those  of  the  high 
contracting  parties  which  are  required  to  refer  to  them,  and  this  they 
bind  themselves  to  do  as  soon  as  possible. 

Aet.  14.  The  present  convention  shall  remain  in  force  until  January 
1,  1880.  If  not  dissolved  a  year  before  the  expiration  of  this  term,  it 
shall  remain  in  full  force  for  a  new  period  of  fifteen  years,  and  so  on, 
fifteen  years  at  a  time,  if  no  objection  is  made. 

Aet.  15.  The  present  convention  shall  be  ratified,  and  the  ratifica- 
tions shall  be  exchanged  at  Paris  within  six  months,  or,  if  possible, 
sooner. 

In  testimony  whereof  the  commissioners  plenipotentiary  have  re- 
spectively signed  the  present  convention  under  their  seals. 

Done  in  four  copies,  at  Paris,  December  23,  1865. 

[Then  follow  the  signatures.] 


APPENDIX  IV. 


Coinage  of  Gold  and  Silver,  from  the  Organization  of  the 
United  States  Mint  to  1884. 


teaks. 

Silver  Dollars. 

Total  Silver  Coinage, 
including  Dollars. 

Total  Gold  Coinage. 

1793-1795 

$204,791 

72,920 

7,776 

327,536 

423,515 

220,920 

54,454 

41,650 

66,064 

19,570 

321 

$370,683.80 

79,077.50 

12,591.45 

330,291.00 

423,515.00 

224,296.00 

74,758.00 

58,343.00 

87,118.00 

100,340.50 

149,388.50 

471,319.00 

597,448.75 

684,300.00  ■ 

707,376.00 

638,773.50 

608,340.00 

814,029.50 

620,951.50 

561,687.50 

17,308.00 

28,575.75 

607,783.50 

1,070,454.50 

1,140,000.00 

501,680.70 

825,762.45 

805,806.50 

895,550.00 

1,752,477.00 

1,564,583.00 

2,002,090.00 

2,869,200.00 

1,575,600.00 

1,994,578.00 

2,495,400.00 

3,175,600.00 

2,579,000.00 

2,759,000.00 

3,415,002.00 

3,443,003.00 

$71,485.00 

1796  

102,727.50 

1797 

103,422.50 

1798 

205,610.00 

1799 

213,285.00 

1800 

817,760.00 

1801 

422,570.00 

1802 

423,310.00 

1803 

258,377.50 

1804 

258,642.50 

1805 

170,367.50 

1806 

324,505.00 

1807 

1808 

437,495.00 
284,665.00 

1809 

169,375.00 

1810 

501,435.00 

1811 

497,905.00 

1812 

290,435.00 

1813 

477,140.00 

1814 

77,270.00 

1815 

3,175.00 

1816 

1817 

1818 

242,940.00 

1819 

258,615.00 

1820 

1,319,030.00 

1821 

189,325.00 

1822 

88,980.00 

1823 

72,425.00 

1824 

93,200.00 

1825  

156,385.00 

1826 

92,245.00 

1827 

131,565.00 

1828 

140,145.00 

1829 

295,717.50 

1830 

643,105.00 

1831 

714,270.00 

1832 

798,435.00 

1833 

1834 

978,550.00 
3,954,270.00 

1835 

2,186,175.00 

250 


APPENDIX  IV. 


Coinage  of  Gold  and  Silvee,  from  the  Oeganization  of  the 
United  States  Mint  to  1884 — Continued. 


TEAKS. 


1836. 

1837. 

1838. 

1839. 

1840. 

1841. 

1842. 

1843. 

1844. 

1845. 

1846 

1847. 

1848. 

1849. 

1850. 

1851. 

1852. 

1853. 

1854. 

1855. 

1856. 

1857. 

1858. 

1859. 

1860. 

1861. 

1862. 

1863. 

1864. 

1865. 

1866. 

1867. 

1868. 

1869. 

1870. 

1871. 

1872. 

1873. 

1874. 

1875. 

1876. 

1877. 

1878. 

1879. 

1880. 

1881. 

1882. 

1883. 

1884. 


Silver  Dollars. 


$1,000 


300 

61,005 

173,000 

184,618 

165,100 

20,000 

24,500 

169,600 

140,750 

15,000 

62,600 

47,500 

1,300 

1,100 

46,110 

33,140 

26,000 

63,500 

94,000 

'  '288,506 

600,530 

559,900 

1,750 

31,400 

23,170 

32,900 

58,550 

57,000 

54,800 

231,350 

588,308 

657,929 

1,112,961 

977,150 


8,573,500 
27,227,500 
27,933,750 
27,637,955 
27,772,075 
28,111,119 
28,099,930 


Total  Silver  Coinage, 
including  Dollars. 


$3,606,100.00 

2,096,010.00 

2,333,243.00 

2,176,296.00 

1,726,703.00 

1,132,750.00 

2,332,750.00 

3,834,750.00 

2,235,550.00 

1,873,200.00 

2,558,580.00 

2,379,450.00 

2,045,050.00 

2,114,950.00 

1,866,100.00 

774,397.00 

999,410.00 

9,077,571.00 

8,619,270.00 

3,501,245.00 

5,135,240.00 

1,477,000.00 

8,040,730.00 

6,187,400.00 

2,769,920.00 

2,605,700.00 

2,812,401.50 

1,174,092.80 

548,214.10 

636,308.00 

680,264.50 

986,871.00 

1,136,750.00 

840,746.50 

1,767,253.50 

1,955,905.25 

3,029,834.05 

2,945,795.50 

5,983,601.30 

10,070,368.00 

19,126,502.50 

28,549,935.00 

28,290,825.50  ' 

27,227,882.50 

27,942,437.50 

27,649,966.75 

27,783,388.75 

28,835,470.15 

28,773,387.80 


Total  Gold  Coinage. 


$4,135,700.00 

1,148,305.00 

1,809,595.00 

1,355,885.00 

1,675,302.50 

1,091,597.50 

1,834,170.00 

8,108,797.50 

5,428,230.00 

3,756,447.50 

4,034,177.50 

20,221,385.00 

3,775,512.50 

9,007,761.50 

31,981,738.50 

62,614,492.50 

56,846,187.50 

39,377,909.00 

25,915,918.50 

28,977,968.00 

36,697,768.50 

15,811,56.3.00 

30,253,725.50 

17,296,077.00 

16,445,476.00 

60,693,237.00 

45,532,386.50 

20,695,852.00 

21, 649,-345.00 

25,107,217.50 

28,313,945.00 

28,217,187.50 

18,114,425.00 

21,828,637.50 

22,257,312.50 

21,302,475.00 

20,376,495.00 

35,249,337.50 

50,442,690.00 

33,553,965.00 

38,178,962.50 

44,078,199.00 

52,798,980.00 

40,986,912.00 

56,157,735.00 

78,733,864.00 

89,413,447.50 

35,936,927.50 

27,932,824.00 


Includes  trade  dollars,  4123^2-S^'  dollars,  and  fractional  coin. 


APPENDIX  V. 


A-VEEAGK  Gold  Equivalent  ^  of  the  Silver  Dollar  of  412^  Grains 
BY  Years,  according  to  otje  Standard  of  1  :  16. 


teae. 

Gold  equivalent  of 
a  dollar  of  silver 
of  412i  grains. 

TEAK. 

Gold  equivalent  of 
a  dollar  of  silver 
of  41'2i  grains. 

1834 

Cents. 
101-62 
101-20 
101-72 
100-98 
100-88 
102-36 
102-36 
101-83 
100-77 
100-34 
100-88 
100-46 
100-56 
101-20 
100-88 
101-30 
101-83 
103-42 
102-57 
104-26 
104-26 
103-95 

1856 

Cents. 
103-95 

1835 

1857 

104-69 

1836 

1858 

103-95 

1837 

1859 

105*22 

1838 

1860 

104-68 

1839 

1861 

10310 

1840 

1862 

1863 

104-16 

1841 

104-06 

1842 

1864 

104-06 

1843 

1865 

103-52 

1844 

1866 

1867 

103-63 

1845 

102-67 

1846 

1868 

102-57 

1847 

1869 

102-47 

1848 

1870 

102-67 

1849 

1871 

102-57 

1850 

1872 

102-25 

1851 

1873 

100-46 

1852 

1874 

98-86 

1853 

1875 

96*43 

1854 

1876 

89'2S 

1855 

'  Taken  from  Linderman's  "Money  and  Legal  Tender,"  pp.  161,  162. 


APPENDIX    VI. 


Flow  of  Silvee  to  the  East. 


YEARS. 

Surplus  of  Imports  1  into 
British  India. 

Sliipments  of  Sil- 
ver to  India  and 
China  from  Eng- 
land and  the  Med- 
iterranean.     Sir 
Hector  Hay.  2 

Exports  of  se- 
ver from  Great 
Britain  and  the 

Gold. 

Silver. 

Mediterranean. 
M.    de    Quette- 
viUe.3 

1835-1836 

$1,694,590 

2,098,620 

2,154,350 

1,294,625 

1,133,215 

686,560 

828,115 

1,055,805 

2,032,615 

3,550,500 

2,722,380 

4,234,745 

5,195,580 

6,744,590 

5,584,965 

5,766,470 

6,338,065 

5,861,505 

5,307,215 

3,656,450 

12,531,225 

10,456,070 

13,915,365 

22,132,265 

21,421,170 

21,162,845 

25,922,125 

34,240,795 

44,491,530 

49,199,820 

28,622,380 

$8,059,480 

6,694,410 

9,834,720 

13,225,650 

8,252,355 

7,008,350 

6,416,140 

14,762,225 

18,477,210 

9,942,805 

4,662,450 

6,891,245 

2,470,955 

1,569,520 

6,368,035 

10,586,125 

14,326,785 

23,025,120 

11,528,720 

148,000 

40,971,875 

55,366,235 

61,094,740 

38,641,710 

55,737,815 

26,640,045 

45,432,280 

62,750,775 

63,983,595 

50,393,990 

93,343,365 

1836  1837 

1837  1838 

1838  1839 

1839  1840 

1840  1841 

1841   1842 

1842  1843 

1843   1844 

1844-1845 

1845   1846 

1846  1847 

1847-1848 

1848-1849 

1849-1850 

1850-1851 

$8,580,500 
13,151,190 
27,795,135 
22,915,085 
39,670,645 
70,644,505 
100,729,605 
28,464,830 
81,752,455 
54,011,650 
44,296,760 
72,998,895 
75,682,665 
84,283,490 
48,726,490 
85,397,440 

1851-1852 
1852-1853 
1853-1854 
1854-1855 
1855-1856 
1856-1857 
1857-1858 
1858-1859 
1859-1860 
1860-1861 
1861-1862 
1862-1863 
1863-1864 
1864-1865 
1865-1866 

$13,150,000 
23,550,000 
22,900,000 
39,900,000 
70,600,000 

100,750,000 
28,450,000 
81,750,000 
54,000,000 
44,300,000 
73,000,000 
75,650,000 
84,275,000 
48,700,000 
35,350,000 

*  "  Report  to  H.  C,  1876,"  p.  172,  and  "  French  Report  of  Conference  of 
1881,"  i,  p.  202. 

2  "  Report  to  H.  C,  1876,"  Appendix,  p.  24. 
8  Ibid..  D.  184. 


APPENDIX   VI. 


253 


Flo"w  of  Silvee  to  the  East — Continued. 


YF.ARS. 

Surplus  of  Imports  into 
British  India. 

Shipments  of  Sil- 
ver to  India  and 
China  from  Eng- 
land and  the  Med- 
iterranean.     Sir 
Hector  Hay. 

Exports  of  Sil- 
ver from  Great 
Britain  and  the 

Gold. 

Silver. 

Mediterranean. 
M.    de    Quette- 
ville. 

1866-1867' 

1867-1868 

1868-1869 

1869-1870 

1870-1871 

1871-1872 

1872-1873 

1873-1874 

1874-1875 

1875-1876 

$19,211,640 

23,047,335 

25,796,760 

27,960,585 

11,410,605 

17,826,720 

12,716,810 

6,913,190 

9,367,675 

7,725,655 

1,036,750 

2,340,645 

4,480,865 

8,752,470 

18,275,995 

24,219,920 

24,654,355 

27,316,580 

$34,815,370 
27,969,805 
43,005,110 
36,601,685 

4,709,685 
32,564,135 

3,523,220 
12,256,915 
23,211,010 

7,776,775 
35,994,360 
73,381,675 
19,853,470 
39,348,715 
19,462,870 
26,895,250 
37,401,135 
32,030,765 

$10,250,000 
17,800,000 
32,800,000 
11,100,000 
19,500,000 
32,650,000 
17,350,000 
38,850,000 
22,700,000 

$10,261,120 
17,792,765 
32,820,740 
11,079,000 
19,460,615 
32,663,075 
17,394,960 
38,853,185 
22,735,590 

1876-1877 

1877-1878 

1878-1879 

1879-1880 

1880-1881 

1881-1882 

1882-1883 

1883-1884 

$999,825,000 

$1,012,062,390 

'  Eleven  months. 


ExpoETS*  OF  Silvee  feom  the  UinTED  States,  1870-1885. 


Year  ending 
June  30. 

To  Europe. 

To  Asia 
and  Oceania. 

To 
other  countries. 

Total. 

1870 

$17,843,652 

$4,924,235 

$1,751,817 

$24,519,704 

1871 

27,724,312 

2,658,527 

1,372,941 

31,765,780 

1872 

26,552,179 

2,856,210 

920,385 

30,328,774 

1873 

33,172,373 

4,846,526 

1,732,960 

39,751,859 

1874 

24,338,142 

6,911,567 

1,338,276 

32,587,985 

1875 

18,698,442 

5,911,310 

541,413 

25,151,165 

1876 

17,181,411 

7,591,415 

556,426 

25,329,252 

1877. 

13,169,252 

15,793,594 

609,017 

29,571,863 

1878 

8,104,657 

16,199,797 

231,216 

24,535,670 

1879 

12,552,285 

7,245,320 

612,222 

20,409,827 

1880 

5,082,074 

6,822,688 

1,599,132 

13,503,894 

1881 

10,584,592 

5,693,563 

563,560 

16,841,715 

1882 

11,495,148 

4,427,097 

907,354 

16,829,599 

1883 

13,133,869 

6,676,177 

409,399 

20,219,445 

1884 

14,413,584 

10,796,459 

841,383 

26,051,426 

1885 

15,787,106 

17,538,345 

428,182 

83,753,633 

2  From  U. 

1885,Table  23, 

18 


S.  Bureau  Statistics,  Quarterly  Report  ending  September  30, 


APPENDIX  VII. 


ComAGE*  OF  Gold  and  Silver  at  the  Feeis-ch  Mint,  1850-1885. 


TEAK. 

Gold. 

SOver. 

1850 

$17,038,478 

53,941,914 

5,405,654 

62,592,804 

105,305,640 
89,485,564 

101,656,399 

114,512,245 
97,737,927 

140,539,558 
85,690,485 
19,643,280 
42,848,398 
42,046,128 
54,768,753 
32,377,367 
73,016,585 
39,715,902 
68,015,337 
46,837,238 
11,078,960 
10,033,976 

$17,291,697 

1851 

1852 

11,865,461 
14,383,689 

1853 

4,019,897 

1854 

424,777 

1855 

5,100,061 

1856 

10,884,442 

1857 

761,922 

1858 

1,732,713 

1859 

1,680,362 

1860 

1,606,839 

1861 

503,609 

1862 

503,879 

1863 

65,922 

1864 

1,459,321 

1865. 

1,844,478 

1866 

8,964,281 

1867 

22,751,707 

1868 

25,889,053 

1869 

13,635,179 

1870 

13,810,261 

1871 

4,775,699 

1872 

5,367,673 
81,254,032 
12,121,997 

1873 

*  '4,863,940 
46,982,400 
85,298,632 
51,036,228 
87,068,620 
4,922,108 

'  433,460 
748,400 



1874 

1875 

15,000,000 

1876 

10,532,263 
8,292,857 

1877 

1878 

364,284 

1879 

1880 

1881 

1882 

1883 

1884  

1885 

'  To  1875  from  "H.  C.  Report,  1876,"  Appendix,  pp.  88,  89.  For  1876- 
1884,  from  Soetbeer's  "  Materialien  zur  Erlautcrung  und  Beurtheilung  der  wirth- 
schaftlichen  Edelmetallverhaltnisse  und  der  Wiihrungsfrage,"  p.  29. 


APPENDIX  VII. 


255 


Coinage'  by  Ooustteies. 


COUNTRIES. 


Great  Britain  and 

Australia 

United  States 

France  

Belgium 

Italy 

Holland 

Germany 

Austria-Hungary. . . 

Russia 

Scandinavian  states. 

Spain 

Portugal 

Total 


Period. 


1851-1884. 
1851-1884. 
1851-1884. 
1851-1884. 
1851-18?4. 
1851-1884. 
1857-1884. 
1857-1884. 
1851-1884. 
1873-1884. 
1876-1884. 
1854-1884. 


RELATIVE    PEB 

CEKT    OF 

Gold. 

Silver. 

Gold. 

Silver. 

$1,181,869,250 

$86,314,250 

93-2 

6-8 

1,310,179,000 

344,333,000 

79-2 

20-8 

1,497,081,250 

228,560.000 

86-8 

13-2 

118,259,250 

89,595,600 

56-9 

43-1 

95,782,250 

114,190,000 

45-6 

54-4 

32,417,750 

144,069,000 

18-4 

81-6 

487,933,000 

290,326,000 

62-7 

37-3 

82,559,750 

252,143,500 

24-7 

75-3 

656,497,750 

145,600,000 

81-9 

18-1 

26,532,500 

10,515,500 

71-6 

28-4 

184,090,750 

120,461,000 

60-4 

39-6 

7,311,000 
$5,680,513,500 

9,093,000 

44-6 

75-6 

55-4 

$1,835,090,760 

24-4 

CoiJTAGE*  BY  Periods, 


PFT?TOnS 

Gold. 

Silver. 

'  EELA.TIVE  PRE   CENT  OF 

Gold. 

Silver. 

1851-1855  

1856-1860 

1861-1865  

1866-1870 

1871-1875 

1876-1880  

1881-1884  

$834,776,500 
896,846,750 
782,691,000 
644,549,500 
947,836,000 
972,158,500 
603,655,250 

$114,395,000 
230,572,500 
176,857,500 
293,045,000 
346,977,000 
434,624,750 
238,619,000 

87-9 
79-5 
81-G 
68-7 
73-2 
69-1 
71-7 

12-1 

20-5 
18-4 
31-3 

26-8 
80-9 
28-3 

1851-1884 

$5,680,513,500 

$1,835,090,750 

75-6 

24-4 

*  From  Ad.  Soetbeer's  "  Materialien  zur  Erlauterung  und  Beurtheilung  dcr 
wirthschaftlichen  Edelmetallverhaltnisse  und  der  Wahrungsfrage,"  1885,  pp. 
33,  34. 


APPENDIX  VIIL 


Annual  Net  Consumption  of  Gold  and  Silver  in  the  Aets.* 


COUNTRIES. 


United  States 

Great  Britain 

France 

Germany 

Switzerland 

Belgium  and  Holland 

Austria-Hungary 

Italy 

Russia 

Other  countries 

Total 


Gold. 


90,000 


Silver. 


Kilog. 
19,500 

Kilog. 
115,000 

17,000 
16,800 
12,000 

72,000 
75,000 

82,000 

10,500 

24,000 

2,900 

24,000 

2,400 

32,000 

4,500 

19,000 

2,400 

32,000 

2,000 

40,000 

515,000 


^  From  Soetbeer,  "  Materialien,"  etc.,  p.  40.  At  $665  for  one  kilogramme  of 
gold,  the  value  of  the  present  annual  consumption  of  gold  is  about  859,859,000; 
at  $41 -C  for  one  kilogramme  of  silver,  the  value  of  the  annual  consumption  of 
silver  is  about  $21,424,000. 


lE^DEX. 


Act,  of  1792,  21-23  ;  of  1834,  60-64  ; 
of  1837,  changes  allov,  73,  74 ;  of 
1853,  79-85;  of  1873,  92;  effect 
of  act  of  1873,  93  ;  acquiescence 
in  same,  179,  180;  act  of  1878, 
181-186. 

Alloy,  in  gold  and  silver  coins,  not 
same,  21 ;  made  the  same,  73. 

Bank  reserves,  in  silver,  30,  52. 

Belgium,  suggests  Latin  Union,  148. 
See  Latin  Union. 

Benton,  attacks  Hamilton,  18;  says 
gold  disappeared,  28 ;  supported 
"  Gold  bill,"  62,  63. 

Bimetallism,  arguments  for,  3-5  ;  ex- 
perience of  United  States  with,  in- 
structive, 8. 

Bland  bill,  173 ;  disregards  movement 
of  silver,  180,  181  ;  history  of, 
181-186  ;  reasons  for  its  passage, 
186-201 ;  supported  by  inflation- 
ists, 186-190,  193;  supported  on 
grounds  of  protection,  193,194; 
humors  of  debate  on,  198-200; 
vetoed  by  President,  185-203  ;  its 
effects,  205-208,  210-214;  why 
dollar  of,  is  at  par,  206,  207. 

Certificates,  silver,  206,  207,  213. 

Clearing-House  connection  with  Treas- 
ury, 211-213. 

Coins,  foreign,  in  use  before  1792,  11  ; 
regulated  by  law,  54;  drive  out 
American  coins,  55. 

Coins,  subsidiary,  1792,  21,  22 ;  erro- 
neous system  of,  in  United  States, 
59;  system  of,  adopted,  1853,  82; 
disappearance  of,  1862,  87,  88  ;  in 
England,  1816,36 ;  in  Latin  Union, 


146-149 ;  in  United  States,  legal 
tender,  205. 

Colonies,  condition  of  coins  in,  10-13. 

Commission,  United  States  Silver,  re- 
port of,  204. 

Conference,  International  Monetary, 
109  ;  of  1867,  153,  171 ;  of  1878, 
184. 

Currency,  condition  of,  before  1834,  52- 
57;  metallic,  in  1830,54. 

Debasement  of  standard,  in  1834,  69- 
73  ;  used  as  precedent  by  United 
States  Supreme  Court,  72. 

Demand,  effect  of,  on  gold,  34,  35,  41. 

Demonetization  of  silver  in  United 
States,  80-92 ;  produced  financial 
panic,  93 ;  silver  demonetized  in 
1874,  93-95;  charge  of  fraud  as 
to,  95-100  ;  in  Germanv,  137-140, 
143. 

Denmark,  demonetized  silver,  145. 

Dollar,  silver,  first  coined,  1793.  21 
not  coined,  1805-1836,  31,  53 
"  of  our  fathers,"  73,  74.    See  Act 

Dollar,  Spanish,  10,  17;  drives  out 
American  dollar,  53  ;  used  in  Chi- 
na, 102. 

Dunham,  Mr.,  explains  act  of  1853,  78, 
79,  84. 

"  Economist,"  London,  index  figures, 
38,  39,  163,  164. 

Fractional    currency,    paper,    87-89  ; 

foolish  attempt  to  redeem,  89,  90 ; 

redemption  of,  90,  91. 
France,  act  of  1803,  118,  150;  absorp- 

tion  of  gold  by,  119;  anticipated 

by  Germany,  135, 158  ;  war-indem- 


258 


INDEX. 


nity,  136  ;  standard  for  silver  coins, 
147  ;  loss  of  gold  after  1803, 150 ; 
depreciation  of  silver  serious  to, 
159  ;  leads  in  movement  away  from 
silver,  1*71. 
Free  coinage,  22;  in  France,  119;  in 
Latin  Union,  148 ;  of  silver  in 
United  States,  taken  away,  205. 

Germany,  135-145;  anticipated  France, 
135;  opportunity  to  get  gold  cur- 
rency, 136 ;  circulation  in  1870, 
136;  acts  of  1871  and  1873,  137- 
140 ;  bank-notes  in,  140 ;  sales  of 
silver,  141,  171-173;  withdrawal 
of  silver  coins,  142 ;  amount  of  sil- 
ver to  be  sold,  142,  143 ;  circula- 
tion in  1885,  144  ;  demand  for 
gold  in,  144,  145. 

Gold,  preference  for,  by  Hamilton,  13; 
disappearance  of,  1810-1820,  28- 
30;  rise  in  value  of,  32-37;  dis- 
coveries of,  in  1848-1850,  75;  ef- 
fects of  discoveries  of,  110,  111; 
production  of,  42  ;  preference  for, 
in  United  States,  80,  114;  disap- 
pearance of,  in  1862,  87;  facts  of 
production  of,  since  1850,  Hi- 
ll 3,  116;  effect  of  new  gold  on 
value  of  silver,  116-118,  134,  135, 
145,  153,  167-170  ;  effect  on  cur- 
rency of  France,  118,  151,  152; 
demand  for,  by  Germany,  144 ; 
preference  for,  by  Latin  Union, 
156 ;  appreciation  of,  163,  194- 
196. 

Gresham's  law  explained,  26,  27  ;  oper- 
ation of,  in  1810-1820,  28-30,  56, 
57;  operation  of,  in  1834-1853,  65 
-69  ;  operation  of,  after  1850,  76  ; 
drives  out  gold  and  silver  with  pa- 
per, 87 ;  in  Europe,  147  ;  denied, 
197. 

Hamilton,  report  on  establishment  of 
Mint,  13-18,  20,  21 ;  why  he  pro- 
posed bimetallism,  14,  15 ;  result 
of  system  of,  57,  58  ;  on  steadi- 
ness of  gold,  113. 

Historical  method,  3,  41. 

Holland,  stopped  coinage  of  silver,  157. 

Horton,  S.  D.,  rise  in  value  of  gold, 
33-36,  39-41  ;  falls  into  error, 
46-50. 

India,  122-134;  passion  for  silver  or- 
naments in,  122-124,  129;  silver 
money  in,  124,  125,  130;  absorp- 


tion of  silver  by,  125-134;  effects 
of  cotton  famine  on,  126  ;  council 
bills,  126,  127,  131,  132  ;  conclu- 
sions of  Government  of  India  as 
to  fall  of  silver,  128  ;  paper  money 
in,  130;  exports  of,  132;  decline 
in  imports  of  silver  into,  133  ;  im- 
ports of  gold  into,  132,  134;  ef- 
fect of  demand  of,  on  value  of 
silver,  170. 

Ingham,  56  ;  advises  single  silver  stand- 
ard, 60,  70,  71. 

Italy.     See  Latin  Union. 

Jefferson,  proposals,  11,  12,  15,  16. 
Jevons,  prices,  33,  38,  39. 
Johnson,  Andrew,  opposes  act,  1853, 
85. 

Latin  Union,  cause  of,  146,  149  ; 
formed,  148,  149  ;  difSculties  of, 
154,  155  ;  suspension  of  free  coin- 
age of  silver  by,  155  ;  preference 
of,  for  gold,  156;  reservations  of 
states  in,  157  ;  cessation  of  silver 
coinage,  158,  165;  "expectant  at- 
titude" of,  158;  coinage  by,  159  ; 
continuance  of  the,  160 ;  effect  of, 
on  value  of  silver,  172. 

Lowndes,  28,  29  ;  on  Mexican  silver 
product,  48;  report  of  1819,  58; 
death,  61. 

Matthews's  resolution,  201,  202. 
Mint   returns,    show    Gresham's    law, 

1793-1834,  30,  31 ;  also,  in  1834- 

1860,  69. 
Monev,  gold  and  silver,  what  gives  value 

to?  113-115;  effect  of  law  on,  115. 
Monometallism,  argument  for,  5-8. 
Morris,  Robert,  scheme  of,  11,  12,  13, 

16. 

Norway  and  Sweden,  demonetized  sil- 
ver, 145. 

Notes,  legal-tender,  issue  of,  87 ;  value 
of,  in  gold,  91. 

Periods,  division  into,  8,  9 ;  the  silver, 
10. 

Prices,  expressing  value  of  gold,  33, 
35,  36  ;  relation  of  prices  to  value 
of  money,  37,  38,  40 ;  on  the  Con- 
tinent, 1751-1830,  40. 

Raguet,  Condv,  35  ;  gives  reason  for 

act  of  1834,  61. 
Ratio,  between  gold  and  silver,  select- 


INDEX. 


259 


ed  In  1792,  15-20;  ratios,  11S0- 
ISOO,  19;  ratios,  1801-1833,  24; 
ratios,  1493-1880,  42  ;  of  1 :  16  in 
1834,  65  ;  difficulty  of  selecting, 
between  gold  and  silver,  67,  68  ; 
of  15^:  1  in  France,  150. 

Report  of  Grand  Committee  of  Conti- 
nental Congress,  12;  of  Board  of 
Treasury,  1786,  12 ;  of  Hamilton 
on  Mint,  13 ;  of  C.  P.  White  on 
coinage,  32  ;  of  J.  J.  Knox  on  Revis- 
ion of  Mint  Laws,  84,97;  of  United 
States  Silver  Commission,  204. 

Restriction  Act,  of  England,  34. 

Seigniorage,  22  ;  imposed  in  1853,  and 
reduced  in  1873,  95. 

Silver,  Mexican  product  of,  15,  44,  47, 
48,  51,  70,  151  ;  fall  in  value  of, 
1790,  20,  25,  150;  production  of, 
42  ;  fall  in  value  of,  after  discov- 
ery of  America,  44 ;  cause  of  fall 
of  value  of,  1780-1820, 45-51 ;  dis- 
appearance of,  about  1840,  67; 
demonetization  of,  in  United  States, 
80  ;  fall  in  value  of,  in  1876,  109, 
143,  154;  why  used  by  semi-civil- 
ized nations,  115  ;  cause  of  fall  in 
value  of,  in  1876,  116-118,  134, 
135,  145,  153,  161-175,  167-170; 
fall  of,  in  1876,  relatively  to  all 
goods,  163 ;  causes  assigned  by 
H.  C.  Committee,  165-167. 


Specie  payments,  suspended,  86  ;  re- 
sumed, 89;  Resumption  Act,  186  ; 
reserve  for,  210;  resumption  of, 
by  England,  28,  33,  34. 

Standard,  single,  of  gold,  accepted  bv 
United  States,  80-82,  86,  99. 

Supply,  effect  of,  on  value  of  gold  and 
silver,  44,  45,  50. 

Switzerland,  reduced  silver  in  small 
coins,  146,  147.    See  Latin  Union. 

Trade-dollar,  authorized,  101 ;  reasons 
for  its  coinage,  101-104  ;  given 
legal  -  tender  power,  208  ;  this 
removed,  209 ;  put  into  circula- 
tion in  United  States,  209  ;  dis- 
continued, 209,  210. 

Treasury,  how  affected  by  Bland  bill, 
207,  210-213. 

Unit,  established  in  silver,  17 ;  in  gold, 
101. 

Value,  is  a  ratio,  37. 

Vote  on  passage  of  act  of  1834,  63  ;  of 
act  of  1853,  85;  of  act  of  1873, 
97;  of  act  of  1878,  183-185. 

"White,  C.  P.  Report  on  coinage,  32, 
59,  60 ;  reports  bill  in  1834,  60 ; 
changed  front,  62. 

White,  J.    Prices  of  silver,  19,  36. 


THE  END. 


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